General equilibrium analysis applied to the economy of a rural community in Mexico

Abstract

Agricultural households in small rural economies are characterized by being a unit of production-consumption, not following the logic of the market and presenting a heterogeneous and diversified productive structure. This research aimed to simulate some policy scenarios to analyze the effects of sectoral policies or trade reforms on the economy of a rural community of 2 500 inhabitants or less. Through the parameterization of the agricultural household model; through the social accounting matrix of the Bajitos de la Laguna community, Tecpan de Galeana municipality, Guerrero, Mexico, and in a context of general equilibrium, three policy experiments were simulated with different model closure rules: 1) 5% drop in the price of basic goods produced by peasant-type households; 2) decrease of 5% in the price of basic goods and a direct transfer to the income of producers; and 3) a transfer to the income of producers without a drop in the prices of basic goods or any other good. The results show how a policy of this type impacts the production of the goods produced in the community, the income of the households, the consumption demand of the households, the supply and demand of factors, the commercialized surplus, mainly. The results also show that the community is indeed distinguished by being a community with typically peasant features and being impacted to different degrees by sectoral or commercial policies.