Publication Date:
2011-11-24
Description:
This paper evaluates the farm-level supply and income effects from removing milk quotas and reducing producer prices with increasing direct compensatory payments. Using a panel of Belgian dairy farms, we first estimate a multi-output multi-input flexible cost function that generates a U-shaped marginal cost curve for each farm of the sample. We then embed each farm cost function in a profit-maximisation programming model that is built and calibrated for each farm in the sample. Accounting for farm heterogeneity, the simulations show how dairy farms without quotas may respond differently to changes in prices and structural changes that may take place within the dairy sector. A quota removal with a 20 per cent reduction in milk prices keeps aggregate milk supply and farm income at about the same level of the 2006 reference year.
Keywords:
C33 - Models with Panel Data, C63 - Computational Techniques, Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets, Q18 - Agricultural Policy
;
Food Policy
Print ISSN:
0165-1587
Electronic ISSN:
1464-3618
Topics:
Agriculture, Forestry, Horticulture, Fishery, Domestic Science, Nutrition
,
Economics
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