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Citation Information

Type Journal Article - Applied Economic Perspectives and Policy
Title Does agricultural trade liberalization reduce rural welfare in less developed countries? The case of CAFTA
Volume 32
Issue 1
Publication (Day/Month/Year) 2008
Page numbers 95-11
URL http://econpapers.repec.org/RePEc:oup:apecpp:v:32:y:2008:i:1:p:95-116
Findings from aggregate economy-wide models suggest that removing tariffs on agricultural imports is detrimental to rural welfare in less developed countries. This paper explores the rural welfare effects of agricultural trade liberalization called for under the Central American Free Trade Agreement (CAFTA), using a disaggregated rural economy-wide model nesting a series of agricultural household models. Lower tariffs reduce nominal incomes for nearly all rural household groups in El Salvador, Guatemala, Honduras and Nicaragua. However, they also lower consumption costs substantially. The net effect on rural households' welfare is positive in most cases, implying that pre-CAFTA agricultural protection policies are disadvantageous for most rural household groups. Copyright 2008, Oxford University Press.

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