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Tortilla price changes and household consumption in rural Mexico: potential effects of free trade agreements
Author(s) -
Arabi Mandana,
Frongillo Edward
Publication year - 2006
Publication title -
the faseb journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.709
H-Index - 277
eISSN - 1530-6860
pISSN - 0892-6638
DOI - 10.1096/fasebj.20.5.lb93
Subject(s) - consumption (sociology) , economics , purchasing power , inflation (cosmology) , food prices , globalization , agricultural economics , agriculture , food security , market economy , macroeconomics , geography , social science , sociology , physics , archaeology , theoretical physics
Free trade policies are claimed to bring national prices closer to international prices and provide consumers with higher purchasing power in the long run. In short term, however, the nutritional status of vulnerable populations can be negatively affected if appropriate protection policies are not into effect. As part of the requirements for NAFTA, the Mexican government announced the termination of its tortilla price regulation, CONASUPO, in late 1998. This study looks at household consumption of tortilla with regards to tortilla prices in 1998 and 1999 in rural Mexico to assess whether there were price changes between the two years and, if so, how the changes affected consumption in poor households. Consumption models of 11 most commonly consumed commodities were created for 783 poor households across 6 states and 55 municipalities in Mexico for 1998 and 1999. Price of tortilla was significantly lower in 1999 after adjustment for inflation. Tortilla consumption had not increased, and after controlling for household characteristics affecting consumption (SES, HH size, type of job, location, etc), the regression coefficient for tortilla prices was −6.484 (p=0.007) in 1998 and −10.587 (p<0.005) in 1999. Ideally, one expects to see relatively robust consumptions of such a staple food item. These findings suggest that consumers were more sensitive to price changes in 1999 compared to 1998 and volatile market prices were more likely to affect consumption in a negative manner. This shows that better price protection policies for consumers are needed to help them benefit from the process of globalization.