Transition problems in economic reform : agriculture in the Mexico - U.S. free trade agreement

The authors use Mexican agriculture as a case study to analyze the transition problems that arise in most major economic reforms. They 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 redistribution aspects of policy reform in the presence of realistic limits on available intervention instruments. They emphasize that adjustment should focus on increasing the value of assets owned by the groups affected, and not on direct income transfers of programs targeted to output or other characteristics controlled by the beneficiaries. That is, they contend that adjustment should betargeted to improving what people have, as opposed to what people do.