Premium
Does Agricultural Trade Liberalization Reduce Rural Welfare in Less Developed Countries? The Case of CAFTA
Author(s) -
Taylor J. Edward,
Naude Antonio Yúnez,
JesurunClements Nancy
Publication year - 2010
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/ppp007
Subject(s) - welfare , economics , agriculture , consumption (sociology) , liberalization , agricultural economics , free trade , international economics , rural area , geography , market economy , social science , archaeology , pathology , sociology , medicine
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.