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Transition Problems in Economic Reform: Agriculture in the Mexico-US Free Trade Agreement

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  • Levy, Santiago
  • van Wijnbergen, Sweder

Abstract

At what speed should Mexican agriculture be incorporated into the North American Free Trade Agreement (FTA)? What policies should characterize the transition? We use Mexican agriculture as a case study to analyse the transition problems that arise in most major economic reforms. In particular, European Community (EC) farmers can expect similar problems if the Common Agricultural Policy (CAP) is dismantled and/or Eastern Europe gains unrestricted access to the EC's farm product markets. We focus on the implications for policy design of the absence of efficient capital markets, on the welfare costs of reforming only gradually, on incentive problems created by trade adjustment policies and on the redistributive aspects of policy reform in the presence of realistic limits on available intervention instruments. Our key point is that adjustment should focus on increasing the value of the assets owned by the groups affected, and not on direct income transfers or programmes targeting output or other characteristics controlled by the beneficiaries. We target adjustment on what people have, as opposed to what people do.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 624.

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Date of creation: Feb 1992
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Handle: RePEc:cpr:ceprdp:624

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Keywords: Economic Reform; Mexico-US FTA; Transition Problems;

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References

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  1. Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters, in: Import Competition and Response, pages 123-150 National Bureau of Economic Research, Inc.
  2. Tornell, Aaron, 1991. "Time Inconsistency of Protectionist Programs," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(3), pages 963-74, August.
  3. Paul Krugman, 1982. "Trade in Differentiated Products and the Political Economy of Trade Liberalization," NBER Chapters, in: Import Competition and Response, pages 197-222 National Bureau of Economic Research, Inc.
  4. Feenstra, R.C. & Rose, A.K., 1992. "Trade with Mexico and Water Use in California Agriculture," Papers, California Davis - Institute of Governmental Affairs 399, California Davis - Institute of Governmental Affairs.
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Cited by:
  1. Rossana Patrón, 2000. "Effects from trade with heterogeneous workers and minimum wages: numerical exercises," Documentos de Trabajo (working papers) 1700, Department of Economics - dECON.
  2. S Van Wijnbergen & Anthony J. Venables, 1993. "Location Choice," CEP Discussion Papers dp0177, Centre for Economic Performance, LSE.
  3. Barbier, Edward B., 2004. "Agricultural Expansion, Resource Booms and Growth in Latin America: Implications for Long-run Economic Development," World Development, Elsevier, vol. 32(1), pages 137-157, January.
  4. Yunez-Naude, Antonio, 2002. "Mexico'S Basic-Crops Subsector: Structure And Competition Under Free Trade," Structural Change as a Source of Trade Disputes Under NAFTA; Proceedings of the 7th Agricultural and Food Policy Systems Information Workshop - 2001, Farm Foundation, Agricultural and Food Policy Syst 16860, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
  5. Rossana Patrón, 1999. "The imperfect mobility of labour: Going from theory to ‘virtual’ reality. Simulations with simple trade models," Documentos de Trabajo (working papers) 2299, Department of Economics - dECON.
  6. Barbier, Edward B. & Burgess, J.C., 1996. "Economic analysis of deforestation in Mexico," MPRA Paper 12089, University Library of Munich, Germany.

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