In this thesis, I ask whether the Program of Direct Support for the Countryside (PROCAMPO) helped Mexican agricultural producers benefit from the North American Free Trade Agreement (NAFTA). Specifically, I explore the effect of PROCAMPO???s decoupled income payments on producers??? ability to switch to cash crop production, and whether these payments continue to alleviate credit constraints for poorer producers. Given that World Trade Organization (WTO) negotiations are currently stalled in part because of the trade concerns of developing nations, exploring the constraints that small producers face and whether decoupled subsidies can assist those producers in benefiting from new markets is important.
Unlike previous studies, which concentrated on specific regions and ejidal lands, I use nation-wide county-level data, allowing me to see the regional distribution of change across Mexico. I use these data to estimate the change in staple crop production as a function of county-level characteristics. This analysis led to several interesting observations. First, I find some evidence to support the hypothesis that an increase in PROCAMPO payments leads to a decrease in the area planted in staples. Second, the implementation of NAFTA is associated with greater cash crop production, and I can see that the creation of new markets is, in general, leading to a reduction in land planted in staples. Third, I find that the effect of PROCAMPO is even larger for ejido producers, implying that the benefits are not constrained to larger producers. Last, I find evidence that areas closest to the United States border have seen a greater movement to cash crop production after NAFTA
