Farmers’ Subjective Valuation of Subsistence Crops: the Case of Traditional Maize in Mexico

Subsistence farmers may not respond to market incentives if their resource allocation decisions are based on shadow prices. This may lead to “puzzling” results from an economic point of view if shadow prices are not taken into account. Subsistence maize farmers in rural Mexico are an example with their non-response to decreasing maize prices after NAFTA. I analyze the true value measure of maize, hence famers’ real incentives to cultivate it, using nationally representative rural household data from Mexico. I develop an agricultural household model with an asymmetric missing market for a subsistence crop that arises from non-market values of this crop. I theoretically derive household-specific shadow prices of maize and estimate them for rural farmers in Mexico. Research results suggest that the value of traditional maize varieties to subsistence farmers is significantly higher than market prices for maize; the same is not true for modern maize varieties. I use estimated shadow prices to identify the key farmand farmer-specific factors that are correlated with the farmers’ values of traditional maize. Use of irrigation and producing on land with high-quality soil are negatively correlated with shadow prices; male-headed households and those comprised of indigenous peoples have above-average shadow prices for traditional varieties of maize. The latter correlation is especially true in southern and southeastern Mexico indicating high de facto incentives to maintain traditional maize in these regions. On-farm conservation programs would be more effective if targeted to communities that have high shadow prices identified in this analysis. The method I use is flexible enough to be applied to guide conservation programs in other regions and with other crops.