Abstract
This paper evaluates the impact of removing corn subsidies on the Mexican economy. More specifically, this paper employs a computable general equilibrium model of Mexico. The model will first simulate the economy's activity under the present conditions. Next, a simulation is conducted under the assumption that the present corn subsidies are reduced. The results are quite revealing. They indicate that while all income classes are initially made worse off, there is an increase in government income. These transfer payments could be targeted to displaced workers as well as the working poor who face inflationary pressures due to rising food costs. These findings also indicate that a decrease in subsidy levels will lead to a marked increase in saving and, consequently, economic investment.
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Doroodian, K., Boyd, R. The impact of removing corn subsidies in mexico: A general equilibrium assessment. Atlantic Economic Journal 27, 150–169 (1999). https://doi.org/10.1007/BF02300235
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DOI: https://doi.org/10.1007/BF02300235