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Conversion from Staple to Cash Crop Production in Mexico After NAFTA: Effects of PROCAMPO and Credit Constraints

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  • Henderson, Joanne
  • Baylis, Katherine R.
  • Barton, Jason

Abstract

In this paper, we ask whether PROCAMPO helped Mexican agricultural producers benefit from NAFTA. Specifically, we explore the effect of these decoupled income payments (PROCAMPO) on producers’ ability to switch to cash crop production, and whether these payments help alleviate credit constraints for poorer producers. Given that WTO negotiations are currently stalled in part because of the trade concerns of developing nations, exploring the constraints that small producers face and whether decoupled subsidies can assist those producers in benefiting from new markets is important. Unlike previous studies, who concentrated on specific regions and ejidal lands, we use nationwide county-level data, which allows for us to see the regional distribution of change across Mexico. We use these data to estimate the change in staple crop production as a function of county-level characteristics. We find some evidence to support the hypothesis that an increase in PROCAMPO payments leads to a decrease in the area planted in staples. Second, the implementation of NAFTA is associated with greater cash crop production and we can see that the creation of new markets is, in general, leading to a reduction in land planted in staples. Third, we find that the effect of PROCAMPO is even larger for ejido producers, implying that their benefits are not constrained to larger producers. Last, we find evidence that areas closest to the United States border have seen a greater movement to cash crop production after NAFTA.

Suggested Citation

  • Henderson, Joanne & Baylis, Katherine R. & Barton, Jason, 2010. "Conversion from Staple to Cash Crop Production in Mexico After NAFTA: Effects of PROCAMPO and Credit Constraints," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61525, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61525
    DOI: 10.22004/ag.econ.61525
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    References listed on IDEAS

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    1. Chiquiar, Daniel, 2008. "Globalization, regional wage differentials and the Stolper-Samuelson Theorem: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 74(1), pages 70-93, January.
    2. Baylis, Kathy & Garduño-Rivera, Rafael & Piras, Gianfranco, 2012. "The distributional effects of NAFTA in Mexico: Evidence from a panel of municipalities," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 286-302.
    3. Singh, Inderjit & Squire, Lyn & Strauss, John, 1986. "A Survey of Agricultural Household Models: Recent Findings and Policy Implications," The World Bank Economic Review, World Bank, vol. 1(1), pages 149-179, September.
    4. Paul Winters & Benjamin Davis, 2009. "Designing a Programme to Support Smallholder Agriculture in Mexico: Lessons from PROCAMPO and Oportunidades," Development Policy Review, Overseas Development Institute, vol. 27(5), pages 617-642, September.
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    7. Louise Cord & Quentin Wodon, 2001. "Do Agricultural Programs in Mexico Alleviate Poverty? Evidence from the Ejido Sector," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 239-256.
    8. Raymond Robertson, 2000. "Wage Shocks and North American Labor-Market Integration," American Economic Review, American Economic Association, vol. 90(4), pages 742-764, September.
    9. Girante, Maria Joana & Goodwin, Barry K. & Featherstone, Allen M., 2008. "Farmers' Crop Acreage Decisions in the Presence of Credit Constraints: Do Decoupled Payments Matter?," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6335, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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