Why are the global prices of farm products showing more or less stability and not improving and what could be its implications for developing countries having high production potential?

Disparity over a period of time also depends upon the institutional factors including the degree of  equality or inequality in the opportunity space.

Natural resource, institutions and human capital will explain most of the growth/income differences between countries.

The major factor of inter-country income disparities is the que quality of human management at the macro-economic level in each country.

Several factors like rate of immigration, institutions, technological change, wage level, rate of employment/unemployment, level of tax... shall be attributed to the inter-country income disparities

Major factor determining the Inter-country income disparities includes immigration of type of mass in and out of a country, its secotral contribution to the GDP, wage rate, agriculture growth including employment rate etc. More importantly local natural resource base also a contributing factor. Therefore, to have clear assessment of  inequality and disparity in the income all source of income with externalities must be considered. 

If other factors are held constant, then economic policies and institutions are the major determinants of the income disparities among countries.

In the above discussions, the most important factor seems missing. The income of a nation is approximately (income per worker) times (number of employed workers). Income from capital assets can be added to this, but this in general follows the total income of workers. 

Now, what are the factors that determine income per worker (or wage rate)? In a regime of free trade (or incompletely free trade) world economy, the wage rate of a nation cannot be arbitrary. We should know when a system of wage rates are in some sense stable and each nation can conserve (near) full employment keeping its industries competitive in the world. The neoclassical Heckscher-Ohlin theory can not help us, because it only says that the real wage (or money wage rate in dollars) tends to equality (in the long run). Fortunately, we have now a new theory on international values (i.e. a system of wage rates for each nation and prices for commodities). See my papers: Shiozawa (2007) A new construction of Ricardian trade theory and Shiozawa (2014) Two rectification problem, and Shiozawa (2014) the Revival of classical theory of values.  They are all uploaded in my ResearchGate page. 

The main message of the new trade theory (or new theory of international values) is that technology matters. It is the technology that determines wage disparity among nations.  When I say technology, I do not mean abstract knowledge in science and technology, but something represented in the input coefficients (i.e. labor input coefficients and material input coefficients). There is no simple measuring scale of the technology level of a nation. International value is determined by a web of input coefficients. As far as you have a fixed technology and the same input coefficients, it is impossible to increase the wage rate of your country. 

Now, how can we improve the total productivity of input coefficients? Of course, through the improvements of productivity of each firms. The theory assures that a factory's productivity improvement that reduces production cost will contribute to improve the wage rate (if it is small). Then a good management of a factory is one of the most required capabilities. The Japanese lesson tells that workers' efforts for productivity improvement contribute enormously (for example Total Quality Control movement). 

Productivity level of a nation is also determined by infrastructures. Power supply stability and good transportation networks including good high ways and efficient ports are prerequisites for a high productivity of a nation's economy . 

Mohammad Taslim referred to natural resources. Natural resources sometimes determine input coefficients: if you have a good petrol deposit, your oil production productivity becomes far higher than other countries without a good deposit. Therefore, natural resources affect technology level of some industries but it is not the major factors that determine the general productivity level of a nation. Nowadays there are extremely many industries which are not dependent on natural resources. In this regard, Heckscher-Ohlin theory is again misleading. Natural resources and factor endowments are not so vital factors that determine the level of competitive wage of a nation. 

Institutions matter, of course, but through the change of productivity. Education will be one of the most important factors that determine the capability of workers and engineers for productivity improvements. Economic stability will be another important factor.

I do not understand well what Joginder Singh really wants to say when he wrote (in the first “answer” in this page) "Why are the global prices of farm products showing more or less stability and not improving"? Please let me ask some questions? 

Joginder, do you want to say that farm products' prices are instable? Or you want to say that now farm prices are stable but you are worrying why they are not rising (improving)? You are posing a new question: Why are the global prices of farm product not showing improvement? Is this what you want to ask?

Dear Sir

Good answers have been added. Shiozawa Sir has really contributed a very enlightened discussion.

I would mention two things: (a) the scientific part of inequality and (b) the institutional part of the continuance of inequality.

When I am referring to the scientific part I mean to draw a parallel with J S Mill's analogy of production and distribution functions. If I am not totally out of sync then remember what he had said- that the production function is a technical one; it is determined by laws of science. While the distribution function is more or less an institutional one. It might mean that (a) if the countries are in autarchy their inequality levels are due to production-related variables like quantity, quality etc. But (b) when the nations are on a free trade scale a far greater part of inter-country inequality can be explained by the international institutional factors. 

Thanks

Israr, India

Dear  Mohammad Israr Khan & Yoshinori Shiozawa,

Thank you very much for your contributions, considering that my socio-cultural environment is plagued by economic hit men, that is, people who do not care to measure institutional quality but are concerned about raising spending levels through infrastructure developed by the government, it should clarify on the one hand the mainstream economy looks resemble Physical and thus appear scientific, the Austrian school focuses on the analysis of institutions in human societies and I can assure you that is one of the main factors for the problem deepens poor institutions, in the Menger's sense.

Its founder, Carl Menger, argued that, for instance money is not the result of deliberate design of anyone. Certainly you can design coins but can not impose them the money's role in society. Historically the money emerges spontaneously in every society as the (more tranzable) more liquid well and takes liquidity even before other important features. Just consider that cattle, Spondylus shell, pressed tea leaves, certain grains, metals and salt have been money in human history. They are institutions in Mengerian sense, ie spontaneous orders:

The lenguje, private property, family, money; as well as, good manners, non-state justice systems (including early Roman and Anglo-Saxon common law), furthermore the enterprise system, and the banking system. The most famous specilist of institutions as spontaneous orders was certainly the Nobel Prize in Economics FA Hayek.

For these reasons, I can recognize that in countries with poor institutions quality that is, countries where the way of doing things are not respected, and where there are always new ways to evade legal process, these issues will be taken income disparities and many other issues related to economic growth. An interesting book about this issue is "Why Nations Fail will." by Daron Acemoglu and James A. Robinson. The foundation states that private property is a very complex and slow and progressive process that originated in Rome, but with a different orientation to contemporary law since it was merely a quality or thing right.

Kind regards,

Richard E. Salvatierra Ube

Guayquil, Ecuador - South America.

In this "answer," I want to discuss the first point of Mohammad Israr Khan, or John Stuart Mill's concept of "production function." 

I am not sure if John Mill had employed an expression as "production function" or "productivity." At least in his opus magnum in economics i.e. The Principles of Political Economy, he does not use these terms. Instead, he uses the word such as "productiveness" and "efficacy of productiveness." I assume Kahn is talking Mill's productiveness concept when he refers to production function. 

Let me cite some excerpts from Chapter 7 "On what depends the degree of productiveness of Productive Agents", Book I of Mill's Principles. 

• We now advance to the second great question in political economy; on what the degree of productiveness of these agents depends. For it is evident that their productive efficacy varies greatly at various times and places. With the same population and extent of territory, some countries have a much lager amount of production than others, and the same country at one time a greater amount than itself at another. (J.S. Mill, Principles I.7.2)
•  The most evident cause of superior productiveness is what are called natural advantages. (J.S. Mill, Principles I.7.3)
•  As the second, therefore, of the causes of superior productiveness, we may rank the greater energy of labour. By this is not to be understood occasional, but regular and habitual energy. (J.S. Mill, Principles I.7.7)
•  The third element which determines the productiveness of the labour of a community, is the skill and knowledge therein existing; whether it be the skill and knowledge of the labourers themselves, or of those who direct their labour. No illustration is requisite to show how the efficacy of industry is promoted by the manual dexterity of those who perform mere routine processes; by the intelligence of those engaged in operations in which the mind has a considerable part; and by the amount of knowledge of natural powers and of the properties of objects, which is turned to the purposes of industry. That the productiveness of the labour of a people is limited by their knowledge of the arts of life, is self-evident; and that any progress in those arts, any improved application of the objects or powers of nature to industrial uses, enables the same quantity and intensity of labour to raise a greater produce. (J.S. Mill, Principles I.7.9)
•  Among the secondary causes which determine the productiveness of productive agents, the most important is Security. By security I mean the completeness of the protection which society affords to its members. This consists of protection by the government, and protection against the government. The latter is the more important. Where a person known to possess anything worth taking away, can expect nothing but to have it torn from him, with every circumstance of tyrannical violence, by the agents of a rapacious government, it is not likely that many will exert themselves to produce much more than necessaries. This is the acknowledged explanation of the poverty of many fertile tracts of Asia, which were once prosperous and populous.  (J.S. Mill, Principles I.7.16)

 As you see, John Stuart Mill thinks that productive efficacy varies greatly even with the same population and extent of territory. Then on what the degree of productiveness depends? Mill thinks this is "the second great question in political economy." (I.7.7) This must be one of the greatest questions for us too. 

The productiveness of a production process depends on natural conditions (I.7.8) and the skill and knowledge of labour communities (I.7.9) and finally on social security (I.7.16). The last paragraph reminds us pages of Why Nations Fail by Daron Acemoglu and James A. Robinson (as Richard Eduardo Salvatierra Ube refers to). 

What I want to emphasize here is that “production function” or the productivity of production process is not determined by a laws of science but by various habits, routines, rules of conducts and various kind of know-how in the production process. New machines and small tricks such as fool-preventives and limit switches help to increase productivity.

Of course, we cannot violate physical laws. For example, if X is the basket of material inputs (including water and air), then the weight of output cannot exceed the total weight of X. However, the efficiency of a production is rarely determined by these physical and chemical laws. They are rarely binding conditions but ordinarily slack conditions.

Professor Takahiro Fujimoto, well known researcher in automobile industry and others,  says that the labor productivity can easily increase 10 to 15 % per year in Japanese firms even now after many years of productivity movement and without any major investment in installations and machines.

I have given a related answer to a different question page:

https://www.researchgate.net/post/Can_the_WDR_2015_be_treated_as_a_critique_of_mainstream_economics#view=55ab5e355dbbbd952a8b45ea

Please be kind enough to read my answers in that question page.

ftp://repec.iza.org/RePEc/Discussionpaper/dp1267.pdf

https://jukuri.luke.fi/bitstream/handle/10024/481583/DP2004_9.pdf?sequence=1