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Conversion from Staple to Cash Crop Production in Mexico After NAFTA: Effects of PROCAMPO and Credit Constraints

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  • Henderson, Joanne
  • Baylis, Katherine R.
  • Barton, Jason

Abstract

In this paper, we ask whether PROCAMPO helped Mexican agricultural producers benefit from NAFTA. Specifically, we explore the effect of these decoupled income payments (PROCAMPO) on producers’ ability to switch to cash crop production, and whether these payments help alleviate credit constraints for poorer producers. Given that WTO negotiations are currently stalled in part because of the trade concerns of developing nations, exploring the constraints that small producers face and whether decoupled subsidies can assist those producers in benefiting from new markets is important. Unlike previous studies, who concentrated on specific regions and ejidal lands, we use nationwide county-level data, which allows for us to see the regional distribution of change across Mexico. We use these data to estimate the change in staple crop production as a function of county-level characteristics. We find some evidence to support the hypothesis that an increase in PROCAMPO payments leads to a decrease in the area planted in staples. Second, the implementation of NAFTA is associated with greater cash crop production and we can see that the creation of new markets is, in general, leading to a reduction in land planted in staples. Third, we find that the effect of PROCAMPO is even larger for ejido producers, implying that their benefits are not constrained to larger producers. Last, we find evidence that areas closest to the United States border have seen a greater movement to cash crop production after NAFTA.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado with number 61525.

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Date of creation: Jul 2010
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Handle: RePEc:ags:aaea10:61525

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Keywords: NAFTA; PROCAMPO; Credit Constraint; Mexico; staple production; crop choice; International Relations/Trade;

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  1. Louise Cord & Quentin Wodon, 2001. "Do Agricultural Programs in Mexico Alleviate Poverty? Evidence from the Ejido Sector," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 239-256.
  2. Raymond Robertson, 2000. "Wage Shocks and North American Labor-Market Integration," American Economic Review, American Economic Association, vol. 90(4), pages 742-764, September.
  3. Daniel Chiquiar, 2004. "Globalization, Regional Wage Differentials and the Stolper-Samuelson Theorem: Evidence from México," Working Papers 2004-06, Banco de México.
  4. Baylis, Kathy & Garduño-Rivera, Rafael & Piras, Gianfranco, 2012. "The distributional effects of NAFTA in Mexico: Evidence from a panel of municipalities," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 286-302.
  5. Paul Winters & Benjamin Davis, 2009. "Designing a Programme to Support Smallholder Agriculture in Mexico: Lessons from PROCAMPO and Oportunidades," Development Policy Review, Overseas Development Institute, vol. 27(5), pages 617-642, 09.
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