Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico
This paper explores an empirical methodology to assess the impacts of trade reforms on household behavior in developing countries. It focuses on consumption and income responses: when price reforms take place, households modify consumption and production decisions and local labor markets adjust. The...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/09/6252145/estimating-household-responses-trade-reforms-net-consumers-net-producers-rural-mexico http://hdl.handle.net/10986/8596 |
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okr-10986-85962021-04-23T14:02:43Z Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico Porto, Guido G. AGRICULTURAL PRICES AGRICULTURAL PRODUCTION AGRICULTURE AVERAGE SHARE CONSTANT PRICES CONSUMER PRICES CONSUMERS CORN PRICES DEMAND FUNCTIONS DEMAND SIDE DEMOGRAPHICS DEVELOPED COUNTRIES DEVELOPING COUNTRIES ECONOMETRIC MODEL ELASTICITY EMPIRICAL APPLICATION EMPIRICAL ESTIMATION EMPIRICAL MODEL EMPIRICAL MODELS EMPIRICAL RESULTS EMPLOYMENT ENDOGENOUS DETERMINATION EQUATIONS EQUILIBRIUM ESTIMATION EXPENDITURES EXPLANATORY VARIABLES EXPORTS FACTOR PRICES FARMS FUTURE RESEARCH GENERAL EQUILIBRIUM MODEL HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEYS INCOME INCOME EFFECT INCOME EFFECTS INCOME ELASTICITY INCOME EQUATION INCOME SUPPORT INCOMES INTERNATIONAL MARKETS LABOR DEMAND LABOR DEMAND FUNCTIONS LABOR INPUTS LABOR MARKET LABOR MARKETS MARGINAL PRODUCT MARKET ACCESS MARKET PRICES MEASUREMENT ERROR MEASUREMENT ERRORS MODEL NATIONAL SURVEYS NOMINAL INCOME NORMAL GOOD POLICY RESEARCH POOR COUNTRIES POOR HOUSEHOLDS POVERTY ALLEVIATION POVERTY DEBATE PRICE CHANGES PRICE DIFFERENCES PRICE EFFECT PRICE ELASTICITIES PRICE ELASTICITY PRICE INCREASES PRODUCER PRICES PRODUCERS PRODUCTION FUNCTION PRODUCTIVE ACTIVITY PROFIT MAXIMIZATION PROPORTIONAL CHANGE REAL INCOME REAL WAGES REGIONAL DUMMIES RELATIVE IMPORTANCE RELATIVE PRICES SALES SUBSTITUTION SUBSTITUTION EFFECT SURPLUS TARIFF BARRIERS TAXATION TRADE BARRIERS TRADE LIBERALIZATION TRADE REFORMS TRANSACTION COSTS UTILITY FUNCTION UTILITY MAXIMIZATION WAGES WELFARE EFFECTS WORLD MARKETS WTO This paper explores an empirical methodology to assess the impacts of trade reforms on household behavior in developing countries. It focuses on consumption and income responses: when price reforms take place, households modify consumption and production decisions and local labor markets adjust. The paper proposes a joint estimator of demand and wage price elasticities from survey data. The method uses an empirical model of demand to extract price information from unit values, and uses this information to estimate the response of households to price reforms. By correcting unit values for quality effects and measurement error, the method overcomes the problem of the endogeneity of unit values. By endogeneizing household income, the model corrects potential biases in the estimation of own- and cross-price elasticities in consumption. The paper applies the method to an expenditure and income survey for rural Mexico. It shows that the corrections suggested in this paper are empirically important. In particular, it shows that allowing for consumption and income responses is a key element of an accurate empirical assessment of trade policy. 2012-06-20T21:33:44Z 2012-06-20T21:33:44Z 2005-09 http://documents.worldbank.org/curated/en/2005/09/6252145/estimating-household-responses-trade-reforms-net-consumers-net-producers-rural-mexico http://hdl.handle.net/10986/8596 English Policy Research Working Paper; No. 3695 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Mexico |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
AGRICULTURAL PRICES AGRICULTURAL PRODUCTION AGRICULTURE AVERAGE SHARE CONSTANT PRICES CONSUMER PRICES CONSUMERS CORN PRICES DEMAND FUNCTIONS DEMAND SIDE DEMOGRAPHICS DEVELOPED COUNTRIES DEVELOPING COUNTRIES ECONOMETRIC MODEL ELASTICITY EMPIRICAL APPLICATION EMPIRICAL ESTIMATION EMPIRICAL MODEL EMPIRICAL MODELS EMPIRICAL RESULTS EMPLOYMENT ENDOGENOUS DETERMINATION EQUATIONS EQUILIBRIUM ESTIMATION EXPENDITURES EXPLANATORY VARIABLES EXPORTS FACTOR PRICES FARMS FUTURE RESEARCH GENERAL EQUILIBRIUM MODEL HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEYS INCOME INCOME EFFECT INCOME EFFECTS INCOME ELASTICITY INCOME EQUATION INCOME SUPPORT INCOMES INTERNATIONAL MARKETS LABOR DEMAND LABOR DEMAND FUNCTIONS LABOR INPUTS LABOR MARKET LABOR MARKETS MARGINAL PRODUCT MARKET ACCESS MARKET PRICES MEASUREMENT ERROR MEASUREMENT ERRORS MODEL NATIONAL SURVEYS NOMINAL INCOME NORMAL GOOD POLICY RESEARCH POOR COUNTRIES POOR HOUSEHOLDS POVERTY ALLEVIATION POVERTY DEBATE PRICE CHANGES PRICE DIFFERENCES PRICE EFFECT PRICE ELASTICITIES PRICE ELASTICITY PRICE INCREASES PRODUCER PRICES PRODUCERS PRODUCTION FUNCTION PRODUCTIVE ACTIVITY PROFIT MAXIMIZATION PROPORTIONAL CHANGE REAL INCOME REAL WAGES REGIONAL DUMMIES RELATIVE IMPORTANCE RELATIVE PRICES SALES SUBSTITUTION SUBSTITUTION EFFECT SURPLUS TARIFF BARRIERS TAXATION TRADE BARRIERS TRADE LIBERALIZATION TRADE REFORMS TRANSACTION COSTS UTILITY FUNCTION UTILITY MAXIMIZATION WAGES WELFARE EFFECTS WORLD MARKETS WTO |
| spellingShingle |
AGRICULTURAL PRICES AGRICULTURAL PRODUCTION AGRICULTURE AVERAGE SHARE CONSTANT PRICES CONSUMER PRICES CONSUMERS CORN PRICES DEMAND FUNCTIONS DEMAND SIDE DEMOGRAPHICS DEVELOPED COUNTRIES DEVELOPING COUNTRIES ECONOMETRIC MODEL ELASTICITY EMPIRICAL APPLICATION EMPIRICAL ESTIMATION EMPIRICAL MODEL EMPIRICAL MODELS EMPIRICAL RESULTS EMPLOYMENT ENDOGENOUS DETERMINATION EQUATIONS EQUILIBRIUM ESTIMATION EXPENDITURES EXPLANATORY VARIABLES EXPORTS FACTOR PRICES FARMS FUTURE RESEARCH GENERAL EQUILIBRIUM MODEL HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEYS INCOME INCOME EFFECT INCOME EFFECTS INCOME ELASTICITY INCOME EQUATION INCOME SUPPORT INCOMES INTERNATIONAL MARKETS LABOR DEMAND LABOR DEMAND FUNCTIONS LABOR INPUTS LABOR MARKET LABOR MARKETS MARGINAL PRODUCT MARKET ACCESS MARKET PRICES MEASUREMENT ERROR MEASUREMENT ERRORS MODEL NATIONAL SURVEYS NOMINAL INCOME NORMAL GOOD POLICY RESEARCH POOR COUNTRIES POOR HOUSEHOLDS POVERTY ALLEVIATION POVERTY DEBATE PRICE CHANGES PRICE DIFFERENCES PRICE EFFECT PRICE ELASTICITIES PRICE ELASTICITY PRICE INCREASES PRODUCER PRICES PRODUCERS PRODUCTION FUNCTION PRODUCTIVE ACTIVITY PROFIT MAXIMIZATION PROPORTIONAL CHANGE REAL INCOME REAL WAGES REGIONAL DUMMIES RELATIVE IMPORTANCE RELATIVE PRICES SALES SUBSTITUTION SUBSTITUTION EFFECT SURPLUS TARIFF BARRIERS TAXATION TRADE BARRIERS TRADE LIBERALIZATION TRADE REFORMS TRANSACTION COSTS UTILITY FUNCTION UTILITY MAXIMIZATION WAGES WELFARE EFFECTS WORLD MARKETS WTO Porto, Guido G. Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico |
| geographic_facet |
Latin America & Caribbean Mexico |
| relation |
Policy Research Working Paper; No. 3695 |
| description |
This paper explores an empirical methodology to assess the impacts of trade reforms on household behavior in developing countries. It focuses on consumption and income responses: when price reforms take place, households modify consumption and production decisions and local labor markets adjust. The paper proposes a joint estimator of demand and wage price elasticities from survey data. The method uses an empirical model of demand to extract price information from unit values, and uses this information to estimate the response of households to price reforms. By correcting unit values for quality effects and measurement error, the method overcomes the problem of the endogeneity of unit values. By endogeneizing household income, the model corrects potential biases in the estimation of own- and cross-price elasticities in consumption. The paper applies the method to an expenditure and income survey for rural Mexico. It shows that the corrections suggested in this paper are empirically important. In particular, it shows that allowing for consumption and income responses is a key element of an accurate empirical assessment of trade policy. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Porto, Guido G. |
| author_facet |
Porto, Guido G. |
| author_sort |
Porto, Guido G. |
| title |
Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico |
| title_short |
Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico |
| title_full |
Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico |
| title_fullStr |
Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico |
| title_full_unstemmed |
Estimating Household Responses to Trade Reforms : Net Consumers and Net Producers in Rural Mexico |
| title_sort |
estimating household responses to trade reforms : net consumers and net producers in rural mexico |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2005/09/6252145/estimating-household-responses-trade-reforms-net-consumers-net-producers-rural-mexico http://hdl.handle.net/10986/8596 |
| _version_ |
1764407690587537408 |