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Does Agricultural Trade Liberalization Reduce Rural Welfare in Less Developed Countries? The Case of CAFTA

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  • J. Edward Taylor
  • Antonio Yúnez Naude
  • Nancy Jesurun-Clements

Abstract

Findings from aggregate economy-wide models suggest that removing tariffs on agricultural imports is detrimental to rural welfare in less developed countries. This paper explores the rural welfare effects of agricultural trade liberalization called for under the Central American Free Trade Agreement (CAFTA), using a disaggregated rural economy-wide model nesting a series of agricultural household models. Lower tariffs reduce nominal incomes for nearly all rural household groups in El Salvador, Guatemala, Honduras and Nicaragua. However, they also lower consumption costs substantially. The net effect on rural households' welfare is positive in most cases, implying that pre-CAFTA agricultural protection policies are disadvantageous for most rural household groups. Copyright 2010, Oxford University Press.

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  • J. Edward Taylor & Antonio Yúnez Naude & Nancy Jesurun-Clements, 2010. "Does Agricultural Trade Liberalization Reduce Rural Welfare in Less Developed Countries? The Case of CAFTA," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 95-116.
  • Handle: RePEc:oup:apecpp:v:32:y:2010:i:1:p:95-116
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    Cited by:

    1. Fu, Shengfei & Epperson, James E. & Ames, Glenn C.W., 2012. "Impacts of the U.S.-Central America-Dominican Republic Free Trade Agreement - the Apple Case," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119782, Southern Agricultural Economics Association.
    2. 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.
    3. Ajmal Waheed & Muhammad Zulfiqar & Anwar F. Chishti, 2012. "Implications of Liberalization of Trade on Economic Welfare of Producers and Consumers of Basmati Rice," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 4(1), pages 1-20, April.
    4. Fu, Shengfei & Epperson, James E. & Ames, Glenn C.W., 2012. "Impacts of the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) on U.S. Fruit Exports - the Apple Case," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119783, Southern Agricultural Economics Association.
    5. Paolo Giordano & Kun Li, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications (Working Papers) 4209, Inter-American Development Bank.

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