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The Economic Impact of a Subsidy on Mexican Grains and Forestry: A CGE Analysis

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This study first examines the economy-wide impacts of the "Pro-Campo" grains subsidy program. It then analyzes the effects of extending this program to forestry as a means of curbing further deforestation. To accomplish these objectives, we employ a computable general equilibrium (CGE) model of the Mexican economy. Our findings show that (1) the subsidies lead to a transfer of resources from the refining, natural gas, services, and financial services sectors into the various agricultural, manufacturing, and mining sectors; (2) All consumption sectors except the food and the alcohol and tobacco sectors decrease as a result of subsidies; (3) The lower income groups experience an increase in their income at the expense of the upper income groups when government revenue and expenditure are held constant. Such results suggest that extension of "Pro-Campo" benefits to the forestry sector should have the desired impact of keeping land and capital resources in forestry. Our results, however, only pertain to commercial species and do not include the off-side damages which may occur to useful noncommercial species. For. Sci. 44(4):578-586.

Keywords: Pro-Campo; sectoral analysis; simulation; welfare

Document Type: Journal Article

Affiliations: Professor of Economics at Ohio University, Department of Economics, Haning Hall, Ohio University, Athens, OH 45701, Phone: (614) 593-2054;, Fax: (614) 593-0181

Publication date: November 1, 1998

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