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Commodity dependence is a high proportion of
Commodity dependence is a high proportion of commodities
In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a co ...
in a country's exports. Therefore, a commodity-dependent country is a country in which commodities constitute the predominant share of its exports, that is when more than 60% of the merchandise a country exports, in value terms, are commodities.
The high number of exports combined with high proportion of commodities in the said exports has significant consequences on development of a country. Export reliance on main commodities, or "commodity dependence," has long been associated with underdevelopment
Underdevelopment, in the context of international development, reflects a broad condition or phenomena defined and critiqued by theorists in fields such as economics, development studies, and postcolonial studies. Used primarily to distinguish s ...
, both conceptually and empirically. One of the main consequences of commodity dependence that commodity-dependent countries struggle with is when commodity prices get affected by negative price shocks, as this can negatively impact short- and medium-term economic development
In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals a ...
and welfare by increasing those countries' vulnerability to these price shocks.
More than half of the world's countries were dependent on commodities, according to a study made by the UNCTAD
The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the U ...
that looked at the level of commodity dependence around the world from 1998 to 2017, using trade data from 189 countries. Commodity dependence was found to be nearly entirely a developing country problem and to mostly affect those classified as