Review of the Terms of Trade in Selected Countries and Iran

Nowadays the terms of trade have great importance for developing countries compared to developed countries. Because worsening terms of trade, that all other conditions are constant, reduces economic welfare. It is believed that the decline in the terms of trade of developing countries to developed countries causes the transfer of income from developing countries to developed countries and increases the income gap between these two groups of countries. This paper aims to examine the Prebisch-Singer hypothesis in different countries. The study examines the relationship between net terms of trade and income terms of trade between oil -exporting developing countries, agricultural commodities exporting developing countries and developed countries exporter of manufactured goods as well as the terms of trade of Iran in 1980-2010. Prebisch-Singer hypothesis states about changes in net terms of trade that this variable, changes to the detriment of developing countries and primary commodities exporter (other than oil and agricultural commodities) and to the benefit of developed countries exporter of manufactured goods.