Abstract
The global food price crisis commenced in 2006 and has coincided with the poverty upsurge in Mexico, as discussed in the previous chapters. This chapter analyzes the vulnerability of rural households, emphasizing causality between increased poverty and rising food prices caused by the international commodity boom in the 2000s. It also examines the degree to which the mitigating effects of the conditional cash transfer (CCT) program could be effective in helping rural poor households smooth their consumption when facing shocks. Empirical results from the fixed effect model show that poverty, measured by food consumption, worsened significantly. In addition, the fact that households with self-consumption were able to cancel out the consumption decrease almost completely by their food production supports causality between poverty increase and rising food prices, as the theory predicts. Moreover, cash transfers under the CCT program served as a partial buffer, but could not completely protect the poor from price shocks.
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Notes
- 1.
Data from World Development Indicators online and Consejo Nacional de Evaluación de la Política de Desarrollo (National Council of the Development Policy Evaluation, CONEVAL) (http://www.coneval.gob.mx). However, it is difficult to determine exactly when the poverty trend reversed due to the absence of national household survey data for 2007.
- 2.
Few studies have examined the longer-term effects of PROGRESA-Oportunidades in general despite the availability of the updated data after 2000. More studies should address the recent effects of the CCT on consumption and poverty by using data for 2007, which include the impact of the important macro shock caused by commodity price increases.
- 3.
Wood et al. (2009) only use the information to distinguish the poor from the non-poor. Valero-Gil and Valero (2008), in contrast, consider the buffer effect of PROGRESA-Oportunidades to the price shocks with another public policy for prices. However, their argument addresses neither the consumption of each household nor that of rural poor, but only focuses on the aggregated poverty ratio.
- 4.
Skoufias and Di Maro (2008) also studied the relation between PROGRESA-Oportunidades and adult work incentives, concluding that no evidence exists to show that the program affected adult participation in the labor market and overall adult leisure time.
- 5.
One could argue that Mexico imports only yellow maize for industrial processes and cattle feed. Domestic production of white maize for tortillas satisfies the national demand (Tani 2012). However, there is an opposing view, such as Fitting (2011), that the imported yellow corn is used for tortillas. Fitting (2011) reports that farmers continue to produce white local maize and even buy them at a store despite a much higher price they pay because they prefer the taste of white maize.
- 6.
Wholesale prices for Mexico City are used because of the limit of data availability. Only prices in Mexico City, Guadalajara (second biggest city) and Puebla (one of the ENCEL pilot states near Mexico City) are available. We should note that the price trends of these three cities turned out to be very similar throughout the period. Wood et al. (2009) also conclude that there is little regional variation in the change in tortilla prices.
- 7.
With respect to other major Mexican staples, rice prices also increased during the same period, but black bean prices were maintained until 2008.
- 8.
I also calculated weighted averages (by number of households for price, and by price for number of households) and Laspeyres averages using the initial year’s number of households and price as weights. The results do not change. The weighted averages will be made available upon request.
- 9.
About 60% of the sample households cultivated lands whose median surface is 2 ha and 90% of them were rain-fed in 2003.
- 10.
- 11.
- 12.
Only the households with matching IDs for both years were selected. As such, the balanced panel data for 2003 and 2007 consist of information on 25,899 households. On eliminating households whose consumption is unreported or reported as nil, the sample size becomes 18,942 households.
- 13.
In 2007, PROGRESA-Oportunidades added 50 pesos per month to their grant which was labeled as a subsidy for energy consumption (Attanasio et al. 2009).
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Uchiyama, N. (2017). Impacts of CCT and Rising Food Prices on Rural Household Consumption. In: Household Vulnerability and Conditional Cash Transfers. SpringerBriefs in Economics(). Springer, Singapore. https://doi.org/10.1007/978-981-10-4103-7_3
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