Working Paper: NBER ID: w11289
Authors: Nava Ashraf; Margaret McMillan; Alix Peterson Zwane
Abstract: This paper investigates the impact of rich-country agricultural support on the poor. Using non-parametric analysis we establish that the majority of poor countries are consistently net importers of food products that are heavily supported by OECD governments. Using a cross-country regression framework we measure the overall impact of agricultural support policies in rich countries on poverty and average incomes in poor countries. We find no support in the cross-country analysis for the claim that OECD polices worsen poverty in developing countries. To better understand what might drive these results, we turn to national employment and household consumption and expenditure surveys from Mexico. There are four important findings from the country case study: (1) the majority of the poorest corn farmers in Mexico report that they never sell any corn, (2) Mexico's own policies (signing NAFTA) have dramatically reduced the Mexican producer price of corn, (3) US corn subsidies have had a limited impact on this price and, (4) domestic policies have largely cushioned Mexican corn farmers from the drop in corn prices. Taken together, the evidence suggests that a reduction in rich-country agricultural support that raises world food prices is likely to hurt the poorest countries but may have little impact at all on the poorest farmers within these countries.
Keywords: OECD; Agricultural Support; Poverty; Developing Countries
JEL Codes: F0; O0; Q0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| commodity price fluctuations (Q02) | OECD agricultural support (Q18) |
| commodity price fluctuations (Q02) | poverty levels in developing countries (F63) |
| domestic policies in Mexico (P16) | corn prices (Q11) |
| domestic policies in Mexico (P16) | farmers' incomes (Q12) |
| US corn subsidies (Q18) | corn prices (Q11) |
| corn prices (Q11) | farmers' incomes (Q12) |
| OECD agricultural support (Q18) | poverty levels in developing countries (F63) |
| OECD agricultural support (Q18) | average incomes in developing countries (F63) |