Institution: University of California at Berkeley
E-mail: esadoulet@worldbank.org
Biosummary:
Elisabeth Sadoulet is professor at the University of California at Berkeley, visiting the World Bank Development Research Group. Her research focuses on poverty, household economics, contract theory, and local institutions, including credit, mutual insurance, and management of common property resources.
Title: Income transfer programs and rural poverty: PROCAMPO in Mexico. Co-authors: Alain de Janvry, and Benjamin Davis
Theme: 2
As a consequence of the NAFTA trade agreement, prices of the major foodgrains were expected to fall significantly in Mexico, with the risk of provoking a serious income crisis and massive displacement of large numbers of non-competitive and empoverished small scale producers. To prevent this from happening, Mexico introduced a program of direct income transfers to producers of the major staples affected by NAFTA. The unique laboratory offered by this experiment allows to measure not only the direct effects of income transfers on rural poverty, but also the indirect effects through use that these households were able to make of the transfers for income generation. Indeed, particularly in the ejido sector, recipients of cash transfers were in the unique position of having access to productive resources and of being seriously liquidity constrained due to incomplete property rights limiting access to credit. We show that cash transfer multipliers were significantly larger than one. We analyze which among recipient households were able to make most effective of the transfers and why. This provides guidelines as to how to manage decoupled farm income support programs to maximize income effects on recipients, particularly among those who are in poverty.