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Milked and Feathered: The Regressive Welfare Effects of Canada's Supply Management Regime

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  • Ryan Cardwell
  • Chad Lawley
  • Di Xiang

Abstract

The production and trade of dairy and poultry products in Canada are controlled by a system of supply management (SM). Output is regulated with production quotas, and imports are restricted through a system of tariff-rate quotas. Many of Canada's trading partners are seeking better access to Canadian dairy and poultry markets in negotiations over proposed preferential trade agreements. These pressures have renewed debate about the future of SM in Canada. We investigate one criticism of SM: that high prices for dairy and poultry products impose regressive distributional effects on Canadian consumers. We apply the Exact Affine Stone Index demand model to data from the Canadian Food Expenditure Survey to estimate consumer responses to price changes for dairy and poultry products. Parameters from the demand model are used to generate welfare comparisons between the current SM regime and a counterfactual liberalized market. Canada's SM policies are highly regressive, imposing a burden of approximately 2.3 percent ($339) of income per year on the poorest households, compared to 0.5 percent ($554) for the richest households. The burden is larger for households with children.

Suggested Citation

  • Ryan Cardwell & Chad Lawley & Di Xiang, 2015. "Milked and Feathered: The Regressive Welfare Effects of Canada's Supply Management Regime," Canadian Public Policy, University of Toronto Press, vol. 41(1), pages 1-14, March.
  • Handle: RePEc:cpp:issued:v:41:y:2015:i:1:p:1-14
    DOI: 10.3138/cpp.2013-062
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    File URL: http://dx.doi.org/10.3138/cpp.2013-062
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    Cited by:

    1. Richard J Vyn & James Rude, 2020. "The Influence of Supply Management on Farmland Values in Ontario," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(4), pages 815-834, December.
    2. Wainio, John & Dyck, John & Meade, Birgit Gisela Saager & Mitchell, Lorrarine & Zahniser, Steven & Arita, Shawn & Beckman, Jayson F. & Burfisher, Mary E., 2014. "Agriculture in the Trans-Pacific Partnership," Economic Research Report 188429, United States Department of Agriculture, Economic Research Service.
    3. Colin A. Carter & Pierre Mérel, 2016. "Hidden costs of supply management in a small market," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 555-588, May.
    4. Pierre Desrochers & Vincent Geloso & Alexandre Moreau, 2018. "Supply management and household poverty in Canada," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(2), pages 231-240, June.
    5. Stavroula Malla & K. K. Klein & Taryn Presseau, 2020. "Have health claims affected demand for fats and meats in Canada?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(3), pages 271-287, September.
    6. Maurice Doyon & Stéphane Bergeron & Lota Tamini, 2017. "Policy relevance of applied economist: Examining sensitivity and inferences," CIRANO Working Papers 2017s-12, CIRANO.
    7. Eugene Beaulieu & V. Balaji Venkatachalam, 2018. "NAFTA Renegotiations: An Opportunity for Canadian Dairy?," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 11(10), March.
    8. Derek G. Brewin, 2016. "Competition in Canada's Agricultural Value Chains: The Case of Grain," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(1), pages 5-19, March.
    9. G. Cornelis van Kooten, 2020. "Reforming Canada's Dairy Sector: USMCA and the Issue of Compensation," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(3), pages 542-558, September.
    10. Jayson Beckman & Steven Zahniser, 2018. "The effects on intraregional agricultural trade of ending NAFTA's market access provisions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(4), pages 599-612, December.
    11. Bruno Larue, 2018. "Economic Integration Reconsidered," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(1), pages 5-25, March.

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