Staples and Staple Theory

Abstract

The staple theory was developed as an analytical framework to help explain the economic evolution of countries which have a relative abundance of land and natural resources, such as Canada. It can also be used to determine under what conditions staple-related economic activity positively contributes to economic development. Early staple theory maintained that the ability to overcome or take advantage of geographical factors was critical to bring staples to markets competitively. Regions can do little to effect demand, however having the capacity to reduce the unit costs of staples, such as transport cost, is critical to the development of staple exports. More recently, the introduction of linkages into analytical frameworks has been of particular importance. The extent and strength of linkages between staple products and the rest of the economy is important in determining the ultimate effect of staple exports on output growth. Even if staple exports constitute only a small percentage of GDP, staple production can still be a dominate force in the economy by way of its complex linkages. However some economies fail to develop potential linkages falling into the staple trap. Often these economies are underdeveloped or have an unequal distribution of income. Staple theory is useful in the explanation of the successes and failures in staple-related development. For an economy to be successful it must make important supply-side decisions and strengthen linkages within the economy.

Keywords: Staple theory, Natural resources, Canada, GDP, Production, Supply-side

JEL Classification: O10, N11, N12