Chapter 3 is an ambitious, and a quite successful, attempt to analyse the economic consequences of the free trade agreement (FTA) between the USA and Mexico for maize, and fruits and other vegetables. In order to do this, the authors decompose the population of Mexico into six categories (subsistence workers, landless workers, owners of rain-fed land, owners of irrigated land, urban workers and urban capitalists) and display in great detail the welfare implications of the trade agreement on each of these segments of the population.

Let us start with the analysis of maize. Maize is a commodity that is subsidised both at the level of the consumer and at the level of the producer. Removing all trade barriers and domestic subsidies consequently hurts both demand and supply, which is a rare combination. In order to get an upper bound to the impact of such a drastic move towards freeing all subsidies, one can readily turn to Table 3.5, column 3, in which the impact on all categories is reported, at a stage when the decision to migrate is not yet taken. One sees that the benefit for the government will amount to about 0.8 per cent of GDP which, for a single commodity, is indeed quite outstanding. In order to analyse the potential Pareto improvements of this measure, Levy and van Wijnbergen then proceed in two stages. They analyse the resources that are freed when the government compensates, in utility terms, all segments of the population: (1) when not taking account of the decision to migrate, (2) when taking account of the decision to migrate.