Growth and terms of trade: A North-South macroeconomic framework

In its process of growth and its attempt to catch up with the North, the South faces a terms-of-trade decline in a product cycle scenario. If the South is dependent on imports of northern machines, its growth rate would be adjusted to the growth rate of the North and the terms of trade would show a tendency to attain a static equilibrium value, given the income elasticities. The roles of technical progress and the diverse mechanisms of distribution of its fruits should be brought into the picture to explain a terms-of-trade decline.