Land markets, structural adjustment, and agricultural performance in Trinidad and Tobago

Andrew Eliel Jacque, Purdue University

Abstract

Standard economic analyses of Dutch disease help to explain poor agricultural performance during periods of large foreign exchange inflow, such as Trinidad and Tobago's oil-export boom of the 1970s. However, they fail to account for asymmetric response to "bust" periods and a lower level of agricultural output at the end of the boom-bust cycle. In Trinidad and Tobago, boom-bust asymmetry may be due to land-market policies that allow farm consolidation while prohibiting subdivision. These restrictions may prevent the reversal of adjustments in the bust period that were induced during the boom phase, or prevent efficient adjustments during the boom phase. The major hypothesis of this study is that reform of land policies to facilitate market-mediated land transfers between small and large farms would lead to more symmetric agricultural supply response and enhanced overall economic performance over the boom-bust cycle. The study utilized, single period and two-period computable general equilibrium models, with world petroleum price shocks to simulate the boom and bust phases, and variation in the parameters of a constant elasticity of transformation function to simulate the impact of agricultural land policy change. The two-period model simulated the boom-bust cycle and evaluated the impact of land policy asymmetry. Results from the single period model indicated that during the boom the incentives favored farm subdivision. Thus, the efficient adjustment of farm size was being prevented in the boom period. The results, when evaluated over the boom-bust cycle, showed that land policy asymmetry positively influenced: (1) agricultural and petroleum output levels; (2) overall economic performance; (3) agriculture's labor and capital use; and (4) farm household income.

Degree

Ph.D.

Advisors

Masters, Purdue University.

Subject Area

Agricultural economics

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