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Adjustment and poverty in Mexican agriculture : how farmers'wealth affects supply response

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  • Lopez, Ramon
  • Nash, John
  • Stanton, Julie

Abstract

The authors report the results of a study of Mexican farm households using 1991 survey data and a smaller resurvey of some of the same households in 1993. One study goal was to empirically examine the relationship between assets and the output supply function. Using a production model focusing on capital as a productive input, they found that both the supply level and the responsiveness (elasticities) to changing input and output prices tend to depend on the farmer's net assets and on how productive assets are used. Regression analysis using data from the surveys shows that farmers who use productive assets such as machinery tend to be positively responsive to price changes, while those with no access to such assets are not. Another study goal was to monitor the condition of Mexican farmers in a rapidly changing policy environment. The 1991 survey data suggest that farmers with more limited use of capital inputs (low-CI) to grow principally corn and to grow fewer crops, on average, than the others. They aso had more problems getting credit and were less likely to use purchased inputs, such as seeds, fertilizer, and pesticides, or to use a tractor to prepare the soil. They tended to be less well-educated, and their land tended to be of lower quality. Results from the panel data showed conditions generally improving for the average farmer in the sample area between 1991 and 1993, during a period when agricultural reforms were implemented. Cropping patterns were more diversified, the average size of landholdings increased, the average farmer received more credit (in real terms), more farm households earned income from off-farm work, and more farmers used purchased inputs. Asset ownership and educational attainment also improved modestly. The very small low-CI group in this sample fared as well as, or better than, the other goroups. True, their level of educational achievement fell, and fewer of them had off-farm income than in 1991. But their use of credit, irrigation, machinery, and purchased inputs increased more than for other groups. The limited data are not proof of a causal link, but the fact that the goals are being met should at least ensure that adverse conditions are not undermining reform. Farmers that lacked access to productive assets did not respond as well to incentives or take advantage of the opportunities presented by reform and may need assistance, particularly to get access to credit markets. There may be a good argument for decoupling income supports from pricesupports for farmers, since income payments that are independent of the vagaries of production could provide a more stable signal of creditworthiness than price supports do. Possibly reorienting research and extension services more to the needs of low-CI producers could also improve the efficiency with which the sector ajdusts to new incentives. Hypotheses and tentative conclusions from this study will be explored further when more data are collected in 1995.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1494.

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Date of creation: 31 Aug 1995
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Handle: RePEc:wbk:wbrwps:1494

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Related research

Keywords: Economic Theory&Research; Environmental Economics&Policies; Agricultural Research; Crops&Crop Management Systems; Water Conservation; Crops&Crop Management Systems; Environmental Economics&Policies; Agricultural Research; Economic Theory&Research; Agricultural Knowledge&Information Systems;

References

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  1. Levy, Santiago, 1991. "Poverty alleviation in Mexico," Policy Research Working Paper Series 679, The World Bank.
  2. Newbery, David M, 1989. "The Theory of Food Price Stabilisation," Economic Journal, Royal Economic Society, vol. 99(398), pages 1065-82, December.
  3. Heath, John Richard, 1990. "Enhancing the contribution of land reform to Mexican agricultural development," Policy Research Working Paper Series 285, The World Bank.
  4. Just, Richard & Lutz, Ernst & Schmitz, Andrew & Turnovsky, Stephen, 1978. "The distribution of welfare gains from price stabilization : An international perspective," Journal of International Economics, Elsevier, vol. 8(4), pages 551-563, November.
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Citations

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Cited by:
  1. John Baffes, 1998. "Structural reforms and price liberalization in Mexican agriculture," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(5), pages 575-587.
  2. L. Alan Winters, 2000. "Trade Liberalisation and Poverty," PRUS Working Papers 07, Poverty Research Unit at Sussex, University of Sussex.
  3. Depetris Chauvin, Nicolas & Porto, Guido G., 2011. "Market Competition in Export Cash Crops and Farm Income," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126159, International Association of Agricultural Economists.
  4. Pranab Bardhan, 2006. "Globalization, Inequality, and Poverty," IDB Publications 9126, Inter-American Development Bank.
  5. Johnson, Nancy L., 1998. "The Demand For Private Property Rights: Land Titling, Credit, And Agricultural Productivity In Mexico," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20998, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Bardhan, Pranab, 2005. "Globalization and Rural Poverty," Working Paper Series RP2005/30, World Institute for Development Economic Research (UNU-WIDER).
  7. Balat, Jorge F. & Porto, Guido G., 2005. "The WTO Doha Round, cotton sector dynamics, and poverty trends in Zambia," Policy Research Working Paper Series 3697, The World Bank.

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