TRANSITION PROBLEMS IN ECONOMIC-REFORM - AGRICULTURE IN THE NORTH-AMERICAN FREE-TRADE AGREEMENT

How fast should Mexican agriculture be incorporated into the North American Free Trade Agreement? We focus on the implications for policy design of the absence of efficient capital markets, on the welfare costs of reforming gradually, on incentive problems created by trade adjustment policies, and on the redistributive aspects of policy reform-all transitional problems that arise in most economic reforms. A key consideration is that adjustment should focus on increasing the value of the assets owned by the groups affected, and not on direct income transfers or programs targeted on characteristics controlled by the beneficiaries.