Inputs, natural resources and institutions

Abstract

Many agricultural policies in Mexico focus on inputs to the sector, defined widely to encompass infrastructure, as well as finance, technology and energy. Some of these policies have already been addressed. The first part of Chapter 3 showed the size of transfers provided on the basis of input use, and the size and composition of support to the sector overall, including for research and technology. The second part of Chapter 3 assessed how subsidies tied to inputs are redistributed by interactions of agents in the market place – economic behaviour, such as farmers increasing the use of an input on the basis of which they receive a subsidy – as measured by welfare gains, showing that energy subsidies, for example, generate very little welfare for commercial farmers, none for subsistence farmers and do little or nothing for hired labourers. The preceding chapter showed that input subsidies oriented towards production are regressive with respect to income, so they do not tend to equalise income or alleviate poverty directly. Below, programmes supporting inputs are considered again, with a view to highlighting likely impacts, many of which are possibly unintended consequences, on input markets and on natural resources.