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Prioritizing public investment in agriculture for post-COVID-19 recovery: A sectoral ranking for Mexico

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  • Sánchez, Marco V.
  • Cicowiez, Martín
  • Ortega, Araceli

Abstract

Mexico's economy contracted unprecedentedly in 2020. Agriculture remains important for the economy and job creation, but it lacks strong productive dynamism and exhibits high informality. We show that investing in agriculture’s infrastructure can contribute to economic recovery and welfare post-COVID-19. On the basis of a dynamic computable general equilibrium model, we allocate to agriculture sectors public investment in productive infrastructure equivalent to 0.25% of GDP during three immediate years and analyze effects up to 2030. We see improvement in GDP, agri-food output and private consumption with rural poverty reduction. Based on the impact on these variables, a ranking suggests that new investments should prioritize the sugar cane sector. Highly ranked are also cereals, mainly maize, and other export-oriented crops such as flowers and coffee. Not only should investments prioritize these sectors, but the government should also finance them with foreign borrowing to speed up recovery and avert the short-term macroeconomic trade-offs of domestic financing.

Suggested Citation

  • Sánchez, Marco V. & Cicowiez, Martín & Ortega, Araceli, 2022. "Prioritizing public investment in agriculture for post-COVID-19 recovery: A sectoral ranking for Mexico," Food Policy, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:jfpoli:v:109:y:2022:i:c:s0306919222000331
    DOI: 10.1016/j.foodpol.2022.102251
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    References listed on IDEAS

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    1. Dessus, Sebastien & Herrera, Remy, 2000. "Public Capital and Growth Revisited: A Panel Data Assessment," Economic Development and Cultural Change, University of Chicago Press, vol. 48(2), pages 407-418, January.
    2. Banerjee, Onil & Cicowiez, Martin & Moreda, Adela, 2019. "Evaluating the Economic Viability of Public Investments in Tourism," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 11(1), pages 101-130, November.
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    8. Matt Lowe & Chris Papageorgiou & Fidel Perez‐Sebastian, 2019. "The Public and Private Marginal Product of Capital," Economica, London School of Economics and Political Science, vol. 86(342), pages 336-361, April.
    9. Cicowiez,Martin & Lofgren,Hans & Cicowiez,Martin & Lofgren,Hans, 2017. "A GEM for streamlined dynamic CGE analysis : structure, interface, data, and macro application," Policy Research Working Paper Series 8272, The World Bank.
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    More about this item

    Keywords

    Computable general equilibrium; Public investment; Agriculture; Mexico; Agricultural policy;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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