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Subsistence Response to Market Shocks

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  • Steve Boucher
  • J. Edward Taylor
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    Abstract

    Microeconomic models posit that transaction costs isolate subsistence producers from output market shocks. We integrate microeconomic models of many heterogeneous households into a general equilibrium model and show that supply on subsistence farms may respond, in apparently perverse ways, to changes in output market prices. Price shocks in markets for staple goods are transmitted to subsistence producers through interactions in factor markets. In the case presented, a decrease in the market price of maize reduces wages and land rents, stimulating maize production by subsistence households; however, real incomes of subsistence households fall. Copyright 2006, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00858.x
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    Bibliographic Info

    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 88 (2006)
    Issue (Month): 2 ()
    Pages: 279-291

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    Handle: RePEc:oup:ajagec:v:88:y:2006:i:2:p:279-291

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    Cited by:
    1. Bellon, Mauricio R. & Hellin, Jon, 2011. "Planting Hybrids, Keeping Landraces: Agricultural Modernization and Tradition Among Small-Scale Maize Farmers in Chiapas, Mexico," World Development, Elsevier, vol. 39(8), pages 1434-1443, August.
    2. Aslihan Arslan & J. Edward Taylor, 2008. "Farmers' Subjective Valuation of Subsistence Crops: The Case of Traditional Maize in Mexico," Kiel Working Papers 1457, Kiel Institute for the World Economy.
    3. Yunez-Naude, Antonio & Serrano-Cote, Valeria, 2009. "Liberalization of Staple Crops: Lessons from the Mexican Experience in Maize," 2009 Conference, August 16-22, 2009, Beijing, China 50827, International Association of Agricultural Economists.
    4. repec:idb:brikps:14358 is not listed on IDEAS
    5. Filipski, Mateusz & Edward Taylor, J. & Msangi, Siwa, 2011. "Effects of Free Trade on Women and Immigrants: CAFTA and the Rural Dominican Republic," World Development, Elsevier, vol. 39(10), pages 1862-1877.
    6. Porto, Guido, 2008. "Agro-manufactured export prices, wages and unemployment," Policy Research Working Paper Series 4489, The World Bank.
    7. Jonasson, Erik & Filipski, Mateusz & Brooks, Jonathan & Taylor, J. Edward, 2012. "Modeling the Welfare Implications of Agricultural Policies in Developing Countries," Working Papers 2012:11, Lund University, Department of Economics.
    8. Taylor, J. Edward & Dyer, George A. & Yunez-Naude, Antonio, 2005. "Disaggregated Rural Economywide Models for Policy Analysis," World Development, Elsevier, vol. 33(10), pages 1671-1688, October.
    9. Olwande, John & Mathenge, Mary K., 2012. "Market Participation among Poor Rural Households in Kenya," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126711, International Association of Agricultural Economists.
    10. Jonasson, Erik & Filipski, Mateusz & Brooks, Jonathan & Taylor, J. Edward, 2012. "Modeling the Welfare Impacts of Agricultural Policies in Developing Countries," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125105, International Association of Agricultural Economists.
    11. J. Edward Taylor, 2012. "A Methodology for Local Economy-Wide Impact Evaluation (LEWIE) of Cash Transfers," Working Papers 99, International Policy Centre for Inclusive Growth.
    12. Jonasson, Erik & Filipski, Mateusz & Brooks, Jonathan & Taylor, J. Edward, 2014. "Modeling the welfare impacts of agricultural policies in developing countries," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 63-82.
    13. repec:idb:brikps:21438 is not listed on IDEAS
    14. repec:idb:brikps:21598 is not listed on IDEAS
    15. Dyer, George A. & Taylor, J. Edward, 2011. "The Corn Price Surge: Impacts on Rural Mexico," World Development, Elsevier, vol. 39(10), pages 1878-1887.
    16. Vergez, Antonin, 2007. "Agricultural Price Seasonality and Market Failure: Examining the Net Seller Household and the Net Benefit Ratio Definition," 106th Seminar, October 25-27, 2007, Montpellier, France 7911, European Association of Agricultural Economists.
    17. Antonio Yunez-Naude, 2012. "The effects of agricultural domestic and trade liberalization on food security: Lessons from Mexico," Serie documentos de trabajo del Centro de Estudios Económicos 2012-01, El Colegio de México, Centro de Estudios Económicos.
    18. Lopez-Feldman, Alejandro, 2012. "Deforestación en México: Un análisis preliminar
      [Deforestation in Mexico: A preliminary analysis]
      ," MPRA Paper 39082, University Library of Munich, Germany.
    19. repec:idb:brikps:28198 is not listed on IDEAS
    20. repec:idb:brikps:38098 is not listed on IDEAS
    21. Barrett, Christopher B., 2008. "Smallholder market participation: Concepts and evidence from eastern and southern Africa," Food Policy, Elsevier, vol. 33(4), pages 299-317, August.
    22. Sandra Polaski et al, 2008. "Policy dilemmas in India: The Impact of changes in agricultural prices on rural and urban poverty," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-012, Indira Gandhi Institute of Development Research, Mumbai, India.

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