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Impacts of Norwegian Milk Quotas on Output Growth: A Modified Distance Function Approach

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Author Info

  • Subal C. Kumbhakar
  • Gudbrand Lien
  • Ola Flaten
  • Ragnar Tveter�s

Abstract

Quota regulations that prevent output expansion of farms and reallocation of output between farms can cause lower growth in output and productivity. The aim of this study was to explain the output growth rate of Norwegian dairy farms since 1976, and to decompose it into output, input, socioeconomic and technical change components. Instead of using the standard distance function approach for multi-output technologies, we use a growth rate formulation, which automatically removes the farm-specific effects. This formulation also helps to impose non-negativity constraints on marginal products of inputs (input elasticities), which are often violated for many observations, especially when flexible functional forms are used. The farm-level panel data cover three periods: before the quota scheme was introduced (1976-1982); the period with the most output-restricting quota scheme (1983-1996); and the period with a more flexible quota scheme (from 1997 onwards). Results show that the milk quota regulations had a significant constraining effect on output growth, in particular on milk output in the period 1983-1996. Furthermore, the output mix has shifted towards meat production for the average farm. What emerges from this study is that output growth and technical change are negatively influenced by policy aims where productive performance has not been the primary objective, and that there is scope for increased farm growth if the quota regime is liberalised. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 The Agricultural Economics Society.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Agricultural Economics.

Volume (Year): 59 (2008)
Issue (Month): 2 (06)
Pages: 350-369

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Handle: RePEc:bla:jageco:v:59:y:2008:i:2:p:350-369

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X

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Cited by:
  1. Latruffe, Laure & Bravo-Ureta, Boris E. & Moreira, Victor H. & Desjeux, Yann & Dupraz, Pierre, 2011. "Productivity and Subsidies in European Union Countries: An Analysis for Dairy Farms Using Input Distance Frontiers," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114396, European Association of Agricultural Economists.
  2. Huettel, Silke & Jongeneel, Roelof A., 2009. "Impact of the EU Milk Quota on Structural Change in the Dairy Sectors of Germany and The Netherlands," 2009 Conference, August 16-22, 2009, Beijing, China 50943, International Association of Agricultural Economists.
  3. Kumbhakar, Subal C., 2013. "Specification and estimation of multiple output technologies: A primal approach," European Journal of Operational Research, Elsevier, vol. 231(2), pages 465-473.
  4. Singbo, Alphonse G. & Emvalomatis, Grigorios & Alfons, Oude Lansink, 2012. "Assessing the impact of crop specialization on farms’ performance in vegetables farming in Benin: a non-neutral stochastic frontier approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149172, Agricultural and Applied Economics Association.
  5. Moreira, Victor H. & Bravo-Ureta, Boris E. & Dunner, Roberto & Vidal, Ricardo, 2012. "Total Factor Productivity Change in Dairy Production in Southern Chile: Is Farm Size Significant?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126895, International Association of Agricultural Economists.
  6. Areal, Francisco J & Tiffin, Richard & Balcombe, Kelvin, 2010. "Provision of an environmental output within a multi-output distance function approach," MPRA Paper 25051, University Library of Munich, Germany.
  7. Diego A. Restrepo-Tobón & Subal C. Kumbhakar & Kai Sun, 2013. "Are U.S. Commercial Banks Too Big?," DOCUMENTOS DE TRABAJO CIEF 010943, UNIVERSIDAD EAFIT.
  8. Latruffe, Laure & Bravo-Ureta, Boris E. & Moreira, Victor H. & Desjeux, Yann & Dupraz, Pierre, 2012. "Productivity and Subsidies in the European Union: An Analysis for Dairy Farms Using Input Distance Frontiers," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126846, International Association of Agricultural Economists.
  9. Subal Kumbhakar & Kai Sun, 2012. "Estimation of TFP growth: a semiparametric smooth coefficient approach," Empirical Economics, Springer, vol. 43(1), pages 1-24, August.

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