The objective of this study was to evaluate the effect of infrastructure and genetic improvement investments, promoted by a government program (Programa de Modernizacion Ganadera), in milk and meat producers profit in Region IX. Using a system of simultaneous equations, the effect of the investment on quality, in the price, in the yield and production cost of milk were estimated. In the case of milk, we reject the nonlinear hypothesis that the elasticities of investment in genetic improvement in gross income and variable costs are equal to zero. The estimation was done using information of 276 producers of the IX Region that participated in the program during the period 1998-99 (17,3 % of the regional population), with information for the years 1998 (baseline), 2001 and 2003. The results indicate that the investment in infrastructure had a positive and statistically significant impact in the quality of milk, which translates into a higher price received by producers. Meanwhile the investment in genetic improvement had a positive and significant effect in milk yield, but also in costs. Similar results were obtained for meat production, but the effect is weaker than in milk production, especially for infrastructure investments.
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