Distributional effects of the Mexican agricultural trade policies: The tomato case
Salcedo-Baca, Diznarda
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Permalink
https://hdl.handle.net/2142/20758
Description
Title
Distributional effects of the Mexican agricultural trade policies: The tomato case
Author(s)
Salcedo-Baca, Diznarda
Issue Date
1990
Doctoral Committee Chair(s)
Schmidt, Stephen C.
Department of Study
Agricultural and Consumer Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Language
eng
Abstract
The objective of this study was to analyze the welfare effects of Mexican tomato export policies. A voluntary import quota and production and export subsidies were used for the estimation of welfare impacts on Mexican consumers, producers and the government budget. Welfare effects were evaluated within a partial equilibrium framework under a two-country one-commodity trade model where Mexico was considered a large exporter nation and the United States the importer country. Changes in consumer and producer surpluses were used as measures of welfare indicators and for evaluating: (1) the welfare transfer effects in monetary terms; (2) the total welfare cost; and (3) the cost of income support due to policy intervention. For the computation of welfare effects associated with tomato trade policies, price and income elasticities were estimated from an econometric model representing the domestic and foreign markets for Mexican tomatoes.
Results indicated that both tomato supplies and demand, foreign and domestic, are price inelastic. Fresh tomatoes were found to be luxury items in the United States and normal goods in Mexico during the winter season. Welfare effects attributable to Mexico's tomato export policy over the 1972-1987 period showed that the specific production subsidy extended by the government to tomato farmers, in the form of subsidized inputs, brought benefits to consumers and producers, while the export subsidy enhanced producers's welfare at the expense of consumers and taxpayers. Both subsidies implied a cost to the government. However, while the former generated a net gain to the country, the latter yielded a net loss. Although, the export subsidy was a more efficient policy in transferring surplus to tomato farmers than the production scheme, results suggest that the government would be better off providing the subsidy to producers (via preferential credit, irrigation and fertilizer) than to exporters (through subsidized credit). The operation of the voluntary import quota benefited both tomato consumers and producers without entailing any direct cost to the Mexican government. The results conform with theoretical postulates and are based on specific assumptions. They are only valid for the analyzed period and are subject to the reliability of data used.
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