Shifting cultivation is one of the most widely distributed forms of agroforestry in the tropics. This paper assesses the potential of using price policies prompting labour mobility to break the fallow crisis typical of such systems leading to the well-known vicious circle of land degradation and increased poverty. Given changing environmental conditions and endogeneity of household choices, a numerical bio-economic model is used, based on data from Mexico, to simulate possible scenarios. Results suggest that reducing staple prices can achieve a win-win outcome when farmers are not constrained to exit and enter the shifting cultivation system. This provides support for the ‘spontaneous reforestation’ hypothesis due to out-migration when the correct economic policies are in place. Copyright © 2009 John Wiley & Sons, Ltd.