An analysis of Mexican agricultural price policies : the inclusion of cross-commodity effects
No Thumbnail Available
Authors
Meeting name
Sponsors
Date
Journal Title
Format
Thesis
Subject
Abstract
Mexico's agricultural crop production has increased slower than domestic demand since 1965. The result has been a decrease in earlier agricultural crop exports and a subsequent increase in imports. Increases in domestic demand for farm products can be attributed to rapid population growth and increasing incomes for a large segment of the population. Recognizing the inability of the agricultural sector to satisfy domestic demands and the resulting high levels of agricultural imports, the Mexican government launched The Mexican Food System (Sistema Alimentario Mexicano or SAM) in 1980. Its major objectives were: (1) to achieve self-sufficiency in corn and beans by 1982, and (2) to achieve self-sufficiency in other basic crops by 1985. Due to the short time span under which these proposed goals are to be achieved, price policy has emerged as the most important tool. The primary objective of this study was to construct a theoretical model of price policy effects on production, consumption and imports which accounts for cross-commodity production influences. This approach also necessarily identifies the subsidies in consumption and production due to the price policies. Using national data for 1965-1980, corn and sorghum supply and demand equations were estimated to test for the existence of cross-commodity effects and calculate subsidies associated with SAM objectives. Emphasis was also placed on identifying the efficiency cost of the subsidized prices. Empirical results supported the expected cross-commodity influences, illustrating that an increase in the corn support price would decrease sorghum production and increase required sorghum imports. Calculations showed that raising the corn support price to reach self-sufficiency would necessitate a subsidy of approximately $53 billion pesos, of which $9.5 billion would be the efficiency cost. Study findings suggest that significant subsidies and efficiency cost will be associated with achieving SAM self sufficiency goals. Mexican policy-makers should be aware of these effects in formulating future agricultural price policies.
Table of Contents
DOI
PubMed ID
Degree
M.S.
Thesis Department
Rights
OpenAccess.
License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License.