THE DECLINE IN MAIZE PRICES, BIODIVERSITY, AND SUBSISTENCE FARMING IN MEXICO Alan Seals* and JoachimZietz** Abstract Concernovertheloss of geneticdiversity in theworld'sfieldcropshas increaseddue to thecommercial introduction of genetically modifiedcrops.Mexico is particularly sensitiveto thisissue,as it is thecenterof geneticdiversity formaizeandhometo a largenumberof indigenousfarmers whopropThis paperanalyzesto whatextentthebiodiversity of maize maybe endangered agatethisdiversity. as subsistence farmers face decreasingmarketpricesof maize. Off-farm is suggestedas a migration to the largeand rapidlygrowingimportsof maize fromthe potentialrationalresponseof farmers modifiedmaize.The maize imports fromtheU.S. U.S., a largeshareof whichconsistsof genetically are seennotonlyas worsening thetermsof tradeof subsistence farmers butalso as raisingtheriskof loweryieldsas indigenous varietiesof maizemaylose theirresilienceto environmental stressthrough contamination withgenetically modified maize.

I. Introduction

not only worsenthe termsof tradeof subsistence farmers, but,as muchof the importedmaize is of In termsof caloric intake,maize is the number the GM variety(such as Bt corn5),theyalso raise one crop in the worldaccordingto the statisticsof the riskof lower yields as indigenousvarietiesof theFood andAgriculture (FAOSTAT). maize may lose theirresilienceto environmental Organization contamination withGM maize. The issue of preserving theplant'sgeneticdiversity stressthrough The paper is organizedas follows.The subseis thus of significantpolicy importance.Even backthoughseveral scientificstudies have been con- quentsectionwill providesome institutional ductedby now,the latestone being the European ground on the connectionbetween biodiversity Commissionreportby Messean et al. (2006), a res- and maize farmingin Mexico. This is followedby olutionof theissue of transgenic1 contamination of a sectionthatexaminesempiricallythe impacton Mexico's native maize varietiesis not likely to the behavior of Mexican maize farmers of occurin thenearfuture.2 arguablythe most importanteconomic eventthat As the debate on geneticallymodified(GM) has affectedthem since the mid 1990s: the very maize is ongoing,notonlyin Mexico followingthe largeincreasein maize importsfromtheU.S. This 1998 moratorium on growingGM maize,3butalso is done for two reasons. First,thereis not much elsewhere,such as in Europe,thispaper will add point in arguing about the loss in biodiversity some fundamentally economic argumentsto the throughthe impact of GM maize if one cannot debate as it pertainsto Mexico.4 In particular, we predictthat enough subsistencefarmerswith an examinehow the currentbiodiversity of maize in interestin indigenousmaize varietieswill be lefta Mexico maybe endangeredas subsistencefarmers, decade fromnow to take on thejob of preserving who maintainand propagatethe biodiversity, are the biodiversityof maize. Second, by observing faced with decliningmarketprices for theirpro- farmers'reactionsto a major change in theirecoit may be possible to distill duce as a consequence of the large and rapidly nomic environment, what drives farmers' behavior.That, in turn,will maize from the U.S. These rising imports imports *

Departmentof Economics and Finance, MeindersSchool of Business, Oklahoma City University. Special thanksto JamesCulpepperforhis helpfulcomments. ** Correspondingauthor: Departmentof Economics and Finance, P.O. Box 129, Middle Tennessee State University,Murfreesboro, TN 37132, U.S.A. Fax: 615-898-5596, email: [email protected], uri:www.mtsu.edu/-jzietz. 10

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and can notpromote geneticdiversity mayreactto thelower production, helppredicthow farmers the envito internalize of their are not a contamination that arise from yetrequired fully yields may to commercial attributable ronmental withGM maize. maizevarieties degradation indigenous and pesticides.Thus,mechanized The sectionfollowingthe empiricalanalysis fertilizers agridiscussesto whatextentthe observedempirical culturenecessarilyrendershigh levels of crop infeasible. Potential areconsistent witha modelofrational diversity pitfalls economically regularities become low levels of The modelprovides, behaviorof farmers. crop diversity among thatattend of thepuzzlingfact evidentwhenseverecropdamageoccursdue to otherthings,an explanation as happenedin the thatoutputof maizehas reactedverylittleto the disease or pest infestation, 25 persharpdecreasein thepriceofmaizesinceNAFTA UnitedStatesin 1970whenapproximately etal. 2003;Nadal centof theU.S. maizecropwas destroyed was enactedin 1994(Ackerman by the leaf blight(Boyce 1996; Nadal 2000).9 2000 and2002).Based on thismodel,sometenta- southern on Due to theecologicalpressureof pestsand discan be formulated tivepolicyrecommendations life of a modified whatsetof economicpoliciesand incentives may ease, the averagecommercial thecurrent bio- seed is only about seven years (Boyce 1996). ofpreserving theobjective support use Commercial ofmaizeinMexico. plantbreedersmustcontinually diversity varietiesof a thegeneticmaterialfromdifferent cropto obtainthedesiredpestand diseaseresistconservation ant qualities.Off-farm10 II. Institutional methods, Background such as germplasm banks,preservethe native intimeandcan in varieties oftheGreenRevolution Sincethebeginning onlyat a specificmoment of thecrop. the not of agricultural the1940's,modernization changes capture evolutionary practices is onlya complement, conservation theattentionThus,off-farm in thedeveloping worldhas attracted conservation to theon-farm thescaleoffarmpro- nota substitute ofpolicymakers. perIncreasing formed the farmers. has innovation duction by regutechnological through whichmotivatesthe forlow-output The incentivestructure, as a substitute larlybeenpromoted is of the subsistence is Subsistence farmer, farming production process indigenousagriculture. dissimilarto thatof the conventional of markedly as an indication oftenviewedby governments when Thisfactis clearlyevident farmer. is per- cash-crop and its eradication economicinefficiency, do notfacethe for a moderneconomy.6one considersthatU.S. producers ceived as a harbinger as and financialconstraints farm- same environmental suchviewsignorethatsubsistence However, who are subsistence the Mexican and the farmers, ers,throughout world,promote protect generally unfitfor of nativecropspeciesand thus relegatedto isolatedlands marginally geneticdiversity no access to credit.A industrial with to all of service a agriculture, public provide significant amounts of farmer who varitheir traditional Due to physical employslarge diversity, humanity. whiletheexpectain the capitalexpectstomakea profit, modernvarieties etiesgenerally outperform is to sell the surplus adverseconditionsthatthe indigenousfarmers tionof the peasantfarmer needs and after not of domestic varieties7 face.The richdiversity own-consumption crop (if any), Ashraf et al. (2005) are met. which seed requirements requirements, onlymeetslocalconsumption contend that the the butit also minimizes agricultural provisionsof the maybe veryspecific,8 Trade (NAFTA) Agreement agronomicrisks posed by drought,climatic NorthAmericanFree effect on theMexicansuband insectinfestationhavehadno discernible change,soil degradation, sistencefarmer.The initialfear that NAFTA (Peralesetal. 2003). of Mexico farmers farmers woulddestroytheindigenous thatsubsistence The geneticdiversity them to with the is also valuableto modernized heavilysubsicompete agricul- byforcing propagate of the United States turalnations,suchas theUnitedStates.Capital- dized farmers appears have farmers as Mexicansubsistence in theindustrialized worldhas unfounded, intensive farming diversification createdan increasingdemand for genetically shownno significant agricultural a periodinwhichtheaverto pestsor cer- awayfrommaizeduring modifiedseeds thatare resistant in fellby 50 percent. of maize Mexico Industrial tainchemicalapplications. agricultural-age price of also show that75 percent farm Ashraf et al. of mechanical (2005) ists,due to the restrictions Vol.54,No. 2 (Fall 2009)

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to substitute maizeas partof indigenousfarmers, all thefarmers away surveyed reportgrowing whileonly fromtheirlocal maize varietiesis citedas one theirprincipalmeansof subsistence, of native forthepersistence cash- possibleexplanation 12-22percent maizeas theprimary reported varieties. from Of the farmers surveyed poorest crop. thatmaizewas 1991-2000,89-92 percent reported and 56-57 pertheirprimary for subsistence crop III. EmpiricalRegularities to sellin did not maize centreported they produce in the A surveyof peasantfarmers the market. ofMexicobySmaleetal. (2001) 1. Data and Methodology Guanajuato region maizeas revealsthatfarmers unanimously recognize and grow a criticalcomponent of theirlivelihood The empiricalresultsmakeuse of data pubtodo so. maizeevenwhenitis unprofitable lishedby theFood and Agriculture Organization Mexicansubsistence farmers use labor-intensive (FAO). The FAO data set is ratherlimitedand severalvarietiesof maize,11 extendsfrom1991 to 2004 formostvariables. methodsto cultivate withdifferent andharvest times,to hedge Thereare no separatedata on commercial and planting risk.12 availablefromFAO.The data farmers indige- subsistence Accordingly, againstenvironmental withsmallerplotsof land,have a usedaredefined nousfarmers, inTable1. time are based on thestructural farming The estimates advantagein labor-intensive comparative over theirlargerand less diversecounterparts.seriesapproach,whichis also knownas unobSeed varietiesfavoredby modernagricultureservedcomponentmodeling,as advocatedby requirelargeamountsof chemicalinputsand are Harvey (1989, 1997) and as implemented, not among others,by Koopman et al. (2000).14 conditions bredforlow-stress environmental suitablefor the small-scalefarmersin Mexico Univariatestructural timeseriesmodelscan be (Soleri and Cleveland2001). Most indigenous expressedas landsthat farmers raisetheircropson peripheral as opposedto theheavily = are primarily rain-fed, yt Vt+ ^Z^fijht-j + et forí = 1,. . . , 7, of industrial farmland agriculturists. irrigated varietiesof where is a of different However,thecultivation which term, intercept fit time-dependent to mitigatethe is modeled maize is not only implemented where the and as a stochastic process, where x. are observed constraints of production, environmental in least as ordinary regressors are notreadilyavailable. and fertilizers irrigation term/z,, The stochastic captures regression. squares factorin unobserved Smaleet al. (2001) findthedetermining varithedependent influences driving is thedifferentialable. It is assumedto followa randomwalkwith theallocationof maizevarieties forspecificvarieties. time in consumption preferences itself drift parameter dependent (ßt).Thedrift farmers havealso beenfoundto cultiSubsistence that forthepurposeofensuring vatecropvarieties TABLE 1. availablein their theseedsfromthesecropsremain VariableDefinitions ofmaize Peralesetal. (2005),ina study community. Definition Variable in the between towns Chiapas diversity neighboring Producerpriceof maize (US $/ton) findthatmaizevarieties are cultivatedprice highlands, imports Importquantityof maize ( 1,000 tons) The toethnolinguistic "distinctly" groups. according Area harvestedof maize ( 1,000 Ha) area continueto use local authorsshow thatfarmers Yield per hectareof maize (tons/Ha) yield andotherwisecpi maizevarieties evenwhena superior Consumerpriceindex,derivedfromthe substitute is availablefromneighboring acceptable cpi inflationrate is gener- mig resources13 farmers. ofgenetic calculatedas (popOff-farm Knowledge migration, ulationgrowthrateat t timesagriculcommunities, ally well-defined amongindigenous turalpopulationat t - 1) - agricultural of securingreliablefood due to the significance of genetic populationat t supplies(Bellon 2001). Yet,diffusion between different Notes:All datarelateto Mexico and coverthetimeperiod ethnolinguistic knowledge groupsis oftencostlydue to languageand ethnic 1991-2004,exceptprice,whichendsin 2003. The data on the aretakenfromFAO, http://faostat.fao.org/default.aspx. barriers (Peraleset al. 2005). Reluctance, 12

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producerprice of maize in Mexico. Anecdotal evidence (Lambrecht 2005; Campbell and T?~ NID(0, 0-2) Hendricks finditdif2006) suggeststhatfarmers = + ficult to survive when the outputpriceof maize ßt ß,-i i, í~NID(0,o-|). that Mostcommentators takeitforgranted distur- drops. Both/x,, and /3,are drivenby white-noise themassiveinfluxofU.S. maizeintoMexicofolareassumed bances,Tj,and£,.Thesedisturbances the of NAFTAin 1994 is of each otherand of ef.15 The lowing implementation to be independent forthedecreasein themaizeprice.A responsible generaltrendmodelcan be testeddownto a sim- recent studyby the World Bank (Fiess and suchas a modelwithno drift plerform, parameter,Lederman2004), however, appears to suggest as forwhich/jLt wouldbe written thatU.S. imports do notplaymuchof a rolefor thepriceofmaize. V ~ NID(0, a'' /*,= /Vi + % evidenceofa stoSincethereis littlestatistical trend, chastic or,forexample,a modelwithdeterministic thestructural timeseriesmodelthat trend, whichariseswhenthedisturbances tj,and£rhave of maize the maize priceas a function case ofthestruc- explains zerovariance.OLS is a limiting andmaizeyieldcollapsestoOLS. A negaimports turaltimeseriesmodel.It ariseswhenßt and the variables tivesignis expectedfortheexplanatory terms17,arebothzero. variance ofthedisturbance and The estimated equationin logtime series imports yield. The advantageof the structural forthetimeperiod1991 to 2003 is linearformat modeloverOLS is thatit can capturemovements givenas inthedatathatarenotrepresented bytheobserved - 0.5821n variables.Thiscan playa significantInprice= 7.11 - 0.1731n independent imports yield (0.001) (0.072) (0.00) one where suchas thepresent rolein applications the data set is ratherlimitedin the sense that R2 = 0.8251,Auto= 0.53,LB = 0.40, relevant variablesare missingbecause potentially JB = 0.SI, Het = 0.54, or are notknowntheoretitheyare notmeasured cally.In theabsenceof allowingforunobserved where p-values are provided in parenthesis P-values the estimatedcoefficients. variables underneath in thesecases, theleft-out components autocorrelaas spurious arealso givenfora testoffirst-order willtypically showup inOLS estimates or residual tion(Auto),theLjung-Boxtestof autocorrelation trends, lags on variables, unexplained norIt shouldbe up to lag orderfour(LB), theJarque-Bera thatsuggestmisspecification. statistics stochasticmalitytest(JB),and a testforheteroskedasticity ofunobserved obviousthattheinclusion is a second-best approach,like all (Het).Noneofthep-valuessuggestanystatistical components levels of statistical one wouldwantto problemat conventional black-boxmethods.16 sigIdeally, that a 10 nificance. The estimates with observed unobserved suggest percent components replace of theunob- rise in importshas loweredthe maize priceby themovement variables.Oftentimes, overthesampleperiod.Sinceimports overtimewill providesome 1.7 percent servedcomponents averhintsas to whatvariablesmaybe drivingthem. tripledovertheperiodfromthepre-NAFTA to the to 1993 for the 1991 2004, year years age Hence,unobserved mayhelp component modeling estimatesuggeststhatimportsare thedata generatingthiselasticity in theprocessof identifying for abouta fifty are if relevant variables In all percentdropin the responsible being process. fact, of maize. of structural in a price application employed particular research no unobserved timeseriesmodeling, (FiessandLederman components Basedonprevious anecdotal evidence and 2005; and shouldbe statistically (Lambrecht 2004) any longer significant 2006),theacreagecultithemodelcollapsestoOLS. Campbelland Hendricks vatedof maize has reactedlittleto thedramatic changein thepriceof maizesincetheimplemen2. Estimation Results is consistent tationof NAFTA.This observation withregressions on theFAO data.Similarto the thebehavior priceequation,no unobserved A keyelementin understanding appears component of Mexican maize farmersis the relationshipsignificant of acreageon the forthe regression betweenmaize importsfromthe U.S. and the walk, mayfollowa random = /*, M,-i+ j8,_,+ 17,

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off-farm The regressions migration explaining priceof maize (priceA) and the consumerprice forMexicoforthe1990sandearly2000s suggest index(cp/_,), bothlaggedbyoneyear,17 thatincreasesin bothacreageand yieldhave a inarea = 9.38 - 0.0751nprice_, - 0.0441n cpi_x Giventhatmaize effecton migration. retarding (0.647) (0.00) (0.819) little since theearly1990s, has = = = changed acreage R2 0.0948,Auto 0.83,LB 0.61, have been while somewhat,the rising yields JB = 0.54,Het = 0.23, wouldhave results indicatethatoff-farm migration problemevident been higherin the absenceof thesetwo trends. Althoughthereis no statistical withthe estimated equation,it clearlydoes not Theyalso revealthata dropin yieldsthatmaybe thepriceofmaizenorthe broughtaboutby GM maize contaminating the explainacreage.Neither consumer traditional maize varietiesmay have significant acreage. priceappearstoinfluence It is oftensuggested thatmaizefarmers foroff-farm maybe consequences migration. sectorandmigrate forcedto leavetheagricultural worsenon the to thecitiesas economicconditions IV. A Model to Explain theObserved of condifarm(Lambrecht 2005). A worsening Behavior tionscouldbe associatedwithloweroutput prices, or loweryieldsassociatedwitha risinginflation, The purposeofthissectionis to checkwhether contamination of themaizecropwithGM maize. in thelastsecdescribed The migration datausedin thisstudyare derived theempirical regularities withcommonassumptions of fromFAO data on totalpopulationgrowthand tionare consistent of This is behavior on the farmers. (Table 1). part Migration maximizing agricultural population figures a simpleutility maximization is explainedas a function oftheacreageandyield doneby postulating andchecking whether fora maizefarmer of maize.As moreacreageis planted,one would problem the can be more work for findings encompassed by this expect opportunity agricultural empirical An is for model. of this useful two workers. This shouldreducemigration. analysis type Similarly, as yieldsgo up, everything else constant, subsis- reasons.First,therehas been some suggestion tencefarmers are betteroff.Again,thisshould (Fiess and Lederman2004) thatMexicanmaize in reduceoff-farm Over thetimeperiod farmershave somehowbehavedirrationally migration. in to the decrease the maize the structural time series model con1991-2004, large priceby response an undertainsa smoothtrend,whichis brought aboutby increasing Second,without production. ofthecoredriving forcesbehindfarmers' thevarianceof tj beingzeroin combination with standing to formulate economic the varianceof £ beingpositive.The estimated behavior,it is difficult coefficients of thefixedregressors and somesta- policyprescriptions aboutpreserving biodiversity. tistical adequacytestsaregivenas HymerandResnick(1969) developa theoretical modelto explainthepositiveproduction response inmig= 7.35 - 0.097lnarea - 0.0S5lnyield of subsistence farmers who are faced with price (0.00) (0.02) (0.10) Barnum and extend (1980) volatility. Hymer Squire = = = R2 0.846,Auto 0.20,LB 0.90, a number ofdifandResnick'sworktoincorporate JB = 0.98,Het = 0.29, ferent scenarioswherefarmers can chooseamong crops,the acreagetheycultivate, the regression Starting sampleone yearlaterin heterogeneous and between andnon-agricultural employfarming 1992raisestheparameter valuesofbotharea and and Resnick ment. neither However, Hymer At the same the unobtime, yieldconsiderably. nor Barnum and Squire(1980) distinguish An (1969) servedtrend becomesstatistically insignificant. and non-tradable between tradable agricultural over the OLS regression period1992-2004yields and Squire'smodelto We extend Barnum output. choicebetweenconsumption inmig= 7.76 - O.U9lnarea - 0.298lnyield includethefarmer's (0.00) (0.00) (0.00) the ofagriofmarket and own-consumption goods R2 = 0.9137,Auto= 0.84,LB = 0.44, cultural goods. JB = 0.65,Het = 0.58, is tomaximizea Thefarmer's decisionproblem function, utility wherenoneof thestatistical adequacytestssugu = ea(m- mfP, gestsa statistical problem. 14

THE AMERICANECONOMIST

whereutilitydependson consuming m, other(a) a given marketgoods m exceedstheminimum fixedamount ofmaizethatis takenfromownpro- wise utilitycould be zero or negative.A Kuhnthatare pur- Tucker formulationreplaces strict equality duction(0), (b) householdproducts is chased fromoutsidethe farm(m and m), and measuresandthefarmer's problem optimization therefore and d leisure The a, jS, (c) (I). identify givenby parameters The preference forownconsumption (0) weights. s.t. is discussedin a previoussection,butit should max0a(m mfl8 - /)*- 0] > m, m>m, /> 0, that0 is thefarmer's preference p[z{' againbe stressed fora specificmaizevarietywhichis endemicto outby the wherevariablen has been substituted A key thefarmer's ethnicity. regionor particular The variablesfor off-farm timeconstraint. puris its of thefarmer's utilityfunction component chasesof householditems(m) and leisure(/) are dependenceon a certainminimumnumberof the farmer's decisionvariables.The Lagrangean householdproductswhichneed to be purchased can be writforthefarmer's optimization problem theStone-Geary offthefarm(m).Following utility tenas, householdproductspurchasedoff-farm function, da(m- mfl8- k[m- p(z(l - If - 0)] (m) raiseutility onlyto theextentthattheirquan- max l, m tityexceedsthisminimum requirement. £(-/). i/j(M -m)~ is maximized subjecttoa timeconstraint Utility The Kuhn-Tucker conditionsfora maximum and a budgetconstraint. Accordingto the time totalavailabletime,whichis set to aregivenby, constraint, has to be dividedbetween unityforsimplicity, dL = ß6«l8 on thefarm(n), leisure(/),andtimespentworking + lA= a ã^ = ^^^"A is oftheutility function 1 n + /.Maximization also subjecttothebudgetconstraint dL 0%m- mfô Xpz * u' = dl f (i - /)* p(y 0) m, side is therevenuefromsellwheretheleft-hand >m,A>0, p[z(l -0-0] in market and where the maize the rightopen ing A{p[z(l /) 0] m} = 0, on off-farm hand side containsall expenditures - m) = 0, m > m, '¡f> 0, iff(m goodsandservices.Revenuefromsellingmaizeis to thatof ofthepriceofmaizerelative theproduct /> o, è ^ o, ao = o. and the of off-farm (p)18 quantity producproducts tion thatis not destinedfor own consumptionThe sign of the borderedHessian for A > 0, toestabis assumedto be givenbythe if/= £ = 0 is positivewhichis necessary (y - 0). Production staticresult The keycomparative lisha maximum. function positive(See Mathematical j- is unambiguously y = z(' - Dt whichindicates as therelative that, price Appendix), wherez is a productivity leisuredeclinesand,hence,farm perhapsrepre- ofmaizedecreases, parameter, of laborincreases, theidiosyncratic the As a result, andwithit output. geneticcharacteristics senting There are two maize. thefarmer's ofa pricechangedominates. pro- incomeeffect indigenous landor acreageplantedand labor ductionfactors: with is consistent The theoretical specification households (n = 1 - /). Onlylaboris treatedas a decision thefactthatfewsubsistence farming is thecor- are completelyautarchic.Subsistencefarmers Theparameter variableinproduction. in the func- need to purchasemarketgoods thattheycannot weightoflabor production responding normalized to produceat home(e.g., Pharmaceuticals and tion.Land is assumedconstant and proassumed that the farmer It is fessionalmedicalcare).It is easy to imaginethat unityforsimplicity. does notenterthecreditmarket.Hence,all off- someofthesemarket goodsarealso usedas comfarmpurchaseshave to be paid for fromthe plementary goodsto leisure,suchas a television. market saleofmaize. thesecomLeisureis notworthas muchwithout with plementary of the utilityfunction The specification goods.As the outputpriceof maize of drops,fewermarketgoods would be available goodssuggestsconsumption respectto market Vol.54,No. 2 (Fall 2009)

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of wouldreactto thecontamination work maizefarmers without a concurrent increasein agricultural maize is Since GM from theirfieldswithGM maize. marketsales resulting effort and additional it is reasonused forfeedinglivestock, workeffort. thisincreased Thus,thekeycontribu-primarily wouldhave trouble is to showthat able to assumethatfarmers tionof thetheoretical derivations amount sellingtheircrop in the marketfor domestic mustconsumea minimum whena farmer forown- maize,and as a resultwould have to accepta of market goodsandalso has preference of thesubthe outputresponseto a price lowermarket price.Thus,thereaction consumption, to geneticcontamination sistencefarmer decreaseis positive. maybe The evidenceprovidedby Ackermanet al. analogousto thatof a decreasein the priceof (2003), the empiricalresultsof the last section, maize. infected of identifying andtheworkofFiessandLederman (2004)suggest Given the difficulty thattheMexicanfarming sectorin totalhas not maize,it wouldbe almostimpossibleto stopthe Most likely,contamireactedto the price decreasein maize witha processof contamination. in output. reduction The factoutputhas notfallen natedmaizewouldbe reusedas seed evenif an is obviousif forno otherreasonthan inresponse tothesharpdropinthepriceofmaizeis infection to farmers on thepartof subsistence There is lack of funds with theoretical model. consistent the fully and startwithclean whenoneconsid- rootout the contamination aboutthisbehavior little irrational is maizefarmers arelikelytoface. seed forseveralseasons.How a contamination erstheconstraints of the topostulate whatmayhappenif ultimately It is interesting gene pool affecting indigenous ofmaizeis an openquesthepriceof agricultural outputwereto fallto a maizeandtheproperties could no longerpurchasea tion.However,it appearsfairlycertainthatthe pointwherefarmers at leastfor of minimum quantity marketgoods. Harrisand totaloutputofmaizewillbe declining, unfamiliar withthe farmers are a short as Todaro(1970) arguethathigher time, expectedearnings seed the new contaminated of in the non-agricultural sectorwill inducerural agronomic properties are not theGM maizevarieties farmers to migrate to urbanareasifthosefarmers stock.In addition, forreuseas seed andGM maizeis more of expectedutility.Our simple intended are maximizers whichsubsisandpesticide, on fertilizer not maximization model does explicitly dependent utility to are not tence farmers rule for a using any significant agricultural producincorporatestopping maizevarieties In addition, thenewhybrid in thetermsof degree.20 tionthatis linkedto deterioration inparticular severe resistant to an be less such tradeof subsistencefarmers, weather, may although forirrimaize is intended because GM in Barnum wouldbe possible principle. extension drought, in an increase therisk All this similar fields. andSquire(1980) providean exampleofa suggests gated farmers. subsistence loss for the basic Harrisand ofcatastrophic model whichincorporates crop withthe empirical Whenseen in conjunction whentimespentinnonTodaro(1970) predictions of the is includedas a choice analysisof thelastsection,thepredictions employment agricultural modelsuggestat leasttwoconclusions Even without an explicitruleforfarm theoretical variable.19 ofbiodiforthepreservation the modelsuggestsan intuitivelythatareofrelevance out-migration, in Mexico.First,further Giventhe versity forout-migration. sharpincreasesin appealing explanation and imports of maizefromtheU.S. will likelycause farmers lackofcapitalavailableto subsistence to leave theirlandand farmers theirpositiveoutputresponseto a pricedecrease, manysubsistence to thecitiesofMexicoor theU.S. Thisis threshold level of migrate theremustbe some minimum thereis anycontamination ofwhether to leave independent leisureandofutility thatinducesa farmer thefarmand to searchforoff-farm employment.of the indigenousvarietiesof maize withGM One mayspeculatethatthefarmwouldbe pur- maize. The factthat,so far,maize outputhas fromthe to thesurgein imports which reactedpositively chasedandusedbya moreefficient farmer, ensuresthat,acrossall farms, largedecreaseintheprice acreagedoesnotfall U.S. andthesubsequent of maize shouldnot be takenas a sign that butyieldsriseinthelongrun. are notunderstress.On staticresultsare Mexicanmaize farmers Giventhatthe comparative do react it is a suresignthatfarmers withtheempirical consistent evidence, thecontrary, sufficiently how subsistenceto thepricedecreaseandthattheyreactrationally. it is interesting to hypothesize

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Theirresponseentailsmoreworkeffort, fewer search of employment in the urban areas of of off-farm for household thatthecontamuse, MexicoortheU.S. It is suggested purchases products lowerlevelsofutility. This inationoftheindigenous maizevarieties withGM and,as a consequence, will make off-farm ever more likely maize maybe interpreted as an alternative unfamigration overtime.However,if subsistence farmers leave vorablemovement in thetermsof tradethatsubthe countryside in large numbers,the current sistencefarmers face.As a consequence, theymay levelsof biodiversity can notbe maintained: with in thelongrunreactto sucha contamination in a no subsistence thereis no biodiversity.manner thatis similarto thatof a reduction in the farmers, of theissue relative offAgain,thisis completely independent priceofmaize:theychoosetomigrate ofcontamination ofthegenepoolbyGM maize. farmas utility levelsfallbelowcertainthreshold thata con- levels. Second,theanalysishas suggested tamination of the indigenousvarietiesof maize Off-farm however,has significant migration, withGM maizemayhavesimilarconsequences as consequences. farmers First,as manyindigenous in therelativepriceof maize. stopproduction, a further reduction themaizegenepoolwillcontract, it is However,thisconclusionis based on the as yet possiblyby a verysizableamount. Although that maize that is difficult to foresee all the of such a unproven assumption any variety consequences an unplanned of the varieties it does not to bode well for the result, hybrid indigenous appear and GM maizewill be moresusceptible to envi- futuresecurity of the world'sfood supplysince ronmental andpestinfes- Mexicois hometotheworld'sonlyself-sustaining stress,suchas droughts than the current varieties formaize. Second,as farmers tation, and,as geneticrepository indigenous a consequence, of maize farmers leave their land, possibly in large numbers, averageyields decline. Mexico'scitiesarelikelyto experience significant stresswhenthenow landlessfarmers arriveand arelookingforemployment. Basedon pastexperiV. Summaryand Conclusions it that ence, appearsunlikely a largenumberof former subsistence farmers willfindemployment. The purposeof thispaperis to modeltheeco- An increasein illegalimmigration to theUnited nomicbehavior ofMexicanmaizefarmers in order Statesis a likelyconsequence. topredict whatwouldbe neededfroman economic In thelightoftheseresults, thekeypolicyissue toensurecontinued number of perspective biodiversity. appearsto be howto stopa sufficient To thatend, the paper attempts to establish subsistence farmers fromleavingtheirland.That of keepingbiodiversity, evenin empiricallythe connectionbetweenthe large is theprerequisite ofmaizefromtheU.S., thepriceofmaize, the absenceof GM maize contamination. Given imports acreage planted,and off-farm migration.The political reality,maize will continueto be resultssuggestthatU.S. importshave depressed imported fromtheU.S. Someeffort maybe worth-/ thepriceof maize.Acreage,however, has reacted whileto containthegrowth If that rateofimports. little.Finally,bothdecliningacreageand maize is notpolitically feasibleand therelativepriceof forcesofoff-farm to decline,cash subsidiesmaybe yieldsarekeydriving migration. maizecontinues The paperdevelopsa simpletheoretical model an optionto keepfarmers on theland.Thesesubto examinewhether theempirical resultsare con- sidieswouldbe thepriceto be paidformaintainsistent withrational behavioron thepartof farm- ingbiodiversity. a transfer Theywouldconstitute ers and to suggestpolicy actionsto maintain scheme that internalizesthe positiveexternal The comparative staticproperties of effects thatarederivedfrombiodiversity. The subbiodiversity. thetheoretical modelare consistent withthekey sidies would also be the price to pay to keep it is shownthatan Mexicanfarmworkers fromillegallyimmigrating empiricalfacts.In particular, increasein production is fullyconsistent witha to theU.S. SinceMexico,theU.S., andtheworld Mexican decliningrelativepriceof maize. But as maize at largereap the benefitsof continued farmers workmoreandcan afford everfeweroff- biodiversity, itappearssensibleto payforthesubfarmproducts, theirutilitylevelsdecline,which sidiesfroman international fundrather thanfrom will eventually inducethemto leave thefarmin thebudgetofa singlecountry.

Vol.54,No. 2 (Fall 2009)

17

MathematicalAppendix -j3W 8ß0» (m - mf+2 (m - mff -fl«(m- mfò2 8a8ß

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GM maize forthe purposeof consumption. See in thiscontext Gilbreth and Otero(2001) for an overview of the armed 1. Transgenicdenotescontamination of native uprising against the Mexican government in the wake of withgenetically modified variplantvarieties NAFTA. eties. 2. QistandChapela(2001) allegethatGM maize 4. A non-economic approachis takenby the recent on maize and biodiversity in has pollutedthenativevarieties in theOaxaca report Mexico the Commission for Mexico.Thisarticlesetoff publishedby regionofsouthern Environmental a firestorm ofdebate(Hodgson,2002) andhas Cooperation(2004), and the studies thatwere commissioned come underintensescrutiny fromthe scienbackground for that tificcommunity. The primary concernis that report. is a soil bacteriathatis GM varietiescould displacenativevarieties 5. Bacillusthuringiensis toxic to certain andpossiblycauseintrogressive pests,especiallytheEuropean hybridization corn borer. derivedfrom withthe wild relativesof maize, such as Bt-toxin, genetically the above mentioned bacteria and whichwouldforever alterthegene teosinte, currently patented by MonsantoCo., createscrystalline pool. formations on thestalksofmaizewhichactas 3. The Mexicanmoratorium was enactedlargely insecticide. dueto strong fromactivist politicalopposition thecountry's groupsrepresenting indigenous 6. See Nadal (2002) foran accountof theagriculture reform measures takenbytheMexican not due to scientific evidence.The farmers, Government after ban does notincludeothergenetically modisigningtheNorthAmerican Free Trade fiedcropsand it does notincludeimports of (NAFTA)in 1994. Agreement 18

THE AMERICANECONOMIST

7. Boyce(1996) notesthatthesubsistence farm- 16. Forcompleteness, it shouldbe mentioned that ers of Mexicohave also incorporated more unobserved can be added to hybrid components modifiedseeds for years, and artificially a structural timeseriesmodelthanjust a stoselectedfordesirabletraitsfromtheseseed chastictrend. Othercomponents maybe a stostocks.Mostresearchers that this assimchasticcycle or a stochasticseasonalor a agree ilationof"improved" seedsintothegenepool stochastic autoregressive component. is at a verylow level. However,GM seeds 17. The consumer priceindexis includedbecause risks that are not yet well ithasbeensuggested pose different (CampbellandHendricks understood or commer2006) thatitsincreasehas causedsubsistence by eitherthefarmers cial plantbreeders farmers toraiseacreage. (McAfee2003). 8. Mexico's ethnolinguistic withmore 18. p represents thetermsof tradeforthesubsisdiversity than200 languagegroupsamongtheindigetencefarmer. nous peoples,is believedto facilitatelocal 19. See equations8 through16 in Barnumand attachmentsto specific maize varieties reference. Squire(1980) forfurther 20. In fact,distributors of genetically modified (Peralesetal. 2005). 9. According to Boyce(1996),Bipolarismaydis, maizevarieties mandatethatnewseedis purthe fungusresponsiblefor SouthernLeaf chased foreverynew plantingseason.This was infective toplantswiththegenetic raises intellectualpropertyrights issues. Blight, 85 percent 2001 makeupsharedby approximately Compare on that the controversial ofthemaizegrownintheU.S. in 1970. MonsantoInc. vs. PercySchmeiser in verdict 10. Ex situ: offsite. Organizations such as the CanadianSupremeCourt.Schmeiser was conInternational Maize and WheatImprovement victedof patentrightviolationforsavingand Center(CIMMYT) are engagedin facilitating knowinglyreplantingthe seeds fromhis thegeneticdiversity ofwheatandmaizetoaid canola field, after being infectedwith in countries food Monsanto Co. canola. developing establishing Roundup-Ready® and overall security agricultural productivity. See Bellon(2001). 11. Although thispaperonlyconcernstheeffects References of GM maize,it shouldbe notedthatsubsistencefarmers in Mexico have shownsome Ackerman, F.,Wise,TA., Gallagher, K.P.,Ney,L. for creolized varieties derived and R. Flores. 2003. Free Trade,Corn,and the preferences fromcross-pollination betweennativevarieties Environment: Environmental Impactsof USand modernhybridized varieties.However, Mexico Corn Trade Under NAFTA. North Bellonet al. (2005) haveshownthatin areas American Commission for Environmental withhighgeneticdiversity such as Chiapas, G-DAEWorking Cooperation. PaperNo. 03-06. farmers are relatively indifferent to thebene- Ashraf, N., M. McMillan,andA. P. Zwan.2005. fitsofcreolization. My Policyor Yours:Have OECD Agricultural 12. Americanfarmers oftenuse severaldifferent Policies AffectedIncomes in Developing varieties ofmaizewithdifferent Countries?NBER WorkingPaper Series. plantandharvest dates,albeiton separateplotsof land. Working Paper11289. Thiswaspointed outto oneoftheauthors in a Bellon,M.R., 2001. Demandand Supplyof Crop conversation withMatthew a Tennessee Infraspecific Garner, Diversityon Farms: Towardsa farmer. PolicyFramework for On-FarmConservation. 13. This is also one of the centralthemesof CIMMYT EconomicsWorkingPaper 01-01. Diamond(1997). Mexico,D.F.: CIMMYT. 14. In SAS, unobserved can Bellon,M.R.,MichelleAdato,Javier Becceril,and component modeling be foundin theETS packageunderthename Dubravka Mindek. 2005. Poor Farmers' UCM. PerceivedBenefitsfromDifferent Types of 15. Afterestimation of the modelparameters, a Maize Germplasm: The Case ofCreolization in Kaimanfilter is appliedto determine thestate LowlandTropicalMexico.WorldDevelopment vectors andßtforeachtimeperiod. 34(1): 113-129. fxt Vol.54,No. 2 (Fall 2009)

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Boyce,J. 1996. EcologicalDistribution, Agricultural Analyser, Modeller and Predictor. London: Trade Liberalization, and In Situ Genetic TimberlakeConsultantsPress. Diversity.Journalof Income Distribution6(2): Lambrecht,B. 2005. Low Prices Force Mexicans fromFields. St. Louis Post Dispatch, Sunday, 265-286. Oct. 30. Barnum, H.N. and L. Squire. 1980. Predicting Agricultural OutputResponse.OxfordEconomic McAffee,K. 2003. Corn Cultureand Dangerous DNA: Real and Imagined Consequences of Papers 32(2): 284-295. Maize TransgeneFlow in Oaxaca. Journalof Campbell, M. and T. Hendricks.2006. Mexico's LatinAmericanGeography2(1): 18-42. Corn Farmers See Their Livelihoods Wither Away: Cheap U.S. Produce Pushes Down Messean, A., Angevin, F., Gómez-Barbero,M., Prices Under Free-TradePact. San Francisco Menrad, K., and E. Rodríguez-Cerezo.2006. New Case Studies on the Coexistenceof GM Chronicle,Monday,July31. and Non-GM Crops in European Agriculture. Commission for Environmental Cooperation. 2004. Maize and Biodiversity:The Effectsof European Commission,JointResearch Centre in Mexico: Maize (DG JRC), Institute for Prospective Findings Transgenic Key and Recommendations. Montréal, Canada,August Technological Studies, Technical Report EUR 11; 22102 EN. http://www.cec.org/files/PDF//Maize-andA. 2000. Mexican Corn: GeneticVariability Nadal, Biodiversity_en.pdf. and TradeLiberalization.ProgramasobrecienDiamond, J. 1997. Guns, Germs,and Steel. New cia, tecnologíay desarrollo.Documentode traYork,NY: W.W.Nortonand Company,Inc. FAOSTAT, http://www.fao.org/es/ess/chartroom/ bajo no. 1-06. A. 2002. Corn in NAFTA: Eight Years Nadal, factoid04.asp. N. D. Mexican Corn: and Lederman. 2004. Fiess, After.ResearchReportforthe NorthAmerican CommissionforEnvironmental The Effects of NAFTA. Trade Note 18, Cooperation. InternationalTrade Department,Washington, Perales, H. R., S.B. Brush, and CO. Qualset. D.C.: WorldBank, September24. 2003. Landraces of Maize in CentralMexico: An Altitudinal Transect. Economic Botany C. and G. Otero. 2001. Democratization Gilbreth, in Mexico: The Zapatista Uprising and Civil 57(1): 7-20. Latin American Society. Perspectives 28(4): Perales, H.R., B.F. Benz, and S.B. Brush. 2005. Maize Diversityand EthnolinguisticDiversity 7-29. in Chiapas, Mexico. Proceedings of the M.P. J.R. and Todaro. 1970. Harris, Migration, A National and TwoAcademy of Sciences 102(3): Unemployment Development: Sector Analysis. American Economic Review 949-954. 60(1): 126-142. Quist, D. and I.H. Chapela. 2001. Transgenic DNA Introgressed into Traditional Maize Harvey,A. C. 1989. Forecasting,StructuralTime Landraces in Oaxaca, Mexico. Nature SeriesModels and theKaimanFilter.Cambridge Press:Cambridgeand New York. 414(6863): 541-543. University Harvey, A. C. 1997. Trends, Cycles and Smale, M., Bellon, M.R., and J.A.A. Gomez. and 2001. Maize Diversity,VarietyAttributes, Autoregressions. Economic Journal 107: Farmers'Choices in SoutheasternGuanajuato, 192-201. Mexico. Economic Developmentand Cultural Hodgson, J. 2002. Maize UncertaintiesCreate Political Fallout. Nature Biotechnology20: Change 50: 201-225. 106-107. Soleri, D. and D.A. Cleveland. 2001. Farmers' Genetic Perceptions Regarding Their Crop Hymer,S. and Kesmck,S. IVW. A Model ot An Agrarian Economy with Nonagricultural Populations:An Example with Maize in the Activities.AmericanEconomic Review 59(4): CentralValleys of Oaxaca, Mexico. Economic 493-506. Botany55(1): 106-128. KoopmanS.J.,Harvey,A.C., Doornik,J.A. and N. Vershuren,C. 2006. Against the Grain. Business Shephard.2000. Stamp: StructuralTimeSeries Europe,WallStreetJournal,Jan.4.

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