IDEAS home Printed from
   My bibliography  Save this article

Subsistence Response to Market Shocks


  • Steve Boucher
  • J. Edward Taylor


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.

Suggested Citation

  • Steve Boucher & J. Edward Taylor, 2006. "Subsistence Response to Market Shocks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 279-291.
  • Handle: RePEc:oup:ajagec:v:88:y:2006:i:2:p:279-291

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
    2. Lewis, Blane D. & Thorbecke, Erik, 1992. "District-level economic linkages in Kenya: Evidence based on a small regional social accounting matrix," World Development, Elsevier, vol. 20(6), pages 881-897, June.
    3. World Bank, 2001. "Mexico : Land Policy--A Decade after the Ejido Reform," World Bank Other Operational Studies 15460, The World Bank.
    4. Barrett, Christopher B., 1998. "Immiserized growth in liberalized agriculture," World Development, Elsevier, vol. 26(5), pages 743-753, May.
    5. Levy, Santiago & Wijnbergen, Sweder van, 1994. "Labor markets, migration and welfare Agriculture in the North-American Free Trade Agreement," Journal of Development Economics, Elsevier, vol. 43(2), pages 263-278, April.
    6. Steven Were Omamo, 1998. "Transport Costs and Smallholder Cropping Choices: An Application to Siaya District, Kenya," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 116-123.
    7. Stone, Richard, 1986. "Nobel Memorial Lecture 1984: The Accounts of Society," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 5-28, January.
    8. de Janvry, Alain & Sadoulet, Elisabeth & de Anda, Gustavo Gordillo, 1995. "NAFTA and Mexico's maize producers," World Development, Elsevier, vol. 23(8), pages 1349-1362, August.
    9. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-1417, November.
    10. Bardhan, Pranab K, 1980. "Interlocking Factor Markets and Agrarian Development: A Review of Issues," Oxford Economic Papers, Oxford University Press, vol. 32(1), pages 82-98, March.
    11. Pyatt, F Graham & Round, Jeffery I, 1979. "Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, vol. 89(356), pages 850-873, December.
    12. Robinson, Sherman & Burfisher, Mary E. & Hinojosa-Ojeda, Raul & Thierfelder, Karen E., 1993. "Agricultural policies and migration in a U.S.-Mexico free trade area: A computable general equilibrium analysis," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 673-701.
    13. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Yunez-Naude, Antonio, 2014. "Old foods and new consumers in Mexico under economic reforms," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 9(1), February.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. Manning, Dale T. & Taylor, J. Edward, 2015. "Agricultural Efficiency and Labor Supply to Common Property Resource Collection: Lessons from Rural Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(3), August.
    11. Nuppenau, Ernst-August, 2015. "Mitigation of Large-Scale Biofuel Expansion with Smallholder Conflict: Modelling of Land Use Dynamics using Control Theory for Policy Design to Sustain Food Security and Improve Productivity," 2015 Conference, August 9-14, 2015, Milan, Italy 225669, International Association of Agricultural Economists.
    12. 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.
    13. Guido G. Porto, 2008. "Agro-Manufactured Export Prices, Wages and Unemployment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 748-764.
    14. Filipski, Mateusz & Aboudrare, Abdellah & Lybbert, Travis J. & Taylor, J. Edward, 2017. "Spice Price Spikes: Simulating Impacts of Saffron Price Volatility in a Gendered Local Economy-Wide Model," World Development, Elsevier, vol. 91(C), pages 84-99.
    15. Kirsten Appendini & Ma. Guadalupe Quijada, 2016. "Consumption strategies in Mexican rural households: pursuing food security with quality," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 33(2), pages 439-454, June.
    16. Dyer, George A. & Taylor, J. Edward, 2011. "The Corn Price Surge: Impacts on Rural Mexico," World Development, Elsevier, vol. 39(10), pages 1878-1887.
    17. Lopez-Feldman, Alejandro, 2012. "Deforestación en México: Un análisis preliminar
      [Deforestation in Mexico: A preliminary analysis]
      ," MPRA Paper 39082, University Library of Munich, Germany.
    18. J. Edward Taylor & Karen Thome, 2012. "A Methodology for Local Economy-wide Impact Evaluation (LEWIE) of Cash Transfers," One Pager 183, International Policy Centre for Inclusive Growth.
    19. 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.
    20. Ott, Ingrid & Papilloud, Christian & Zülsdorf, Torben, 2008. "What drives innovation? Causes of and Consequences for nanotechnologies," Kiel Working Papers 1455, Kiel Institute for the World Economy (IfW).
    21. Olwande, John & Mathenge, Mary K., 2011. "Market Participation Among Poor Rural Households in Kenya," Working Papers 202599, Egerton University, Tegemeo Institute of Agricultural Policy and Development.
    22. 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.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:88:y:2006:i:2:p:279-291. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.