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Efficiency Loss Due to Distortions in Dutch Milk Quota Trade

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  • Boots, Maroeska
  • Oude Lansink, Alfons
  • Peerlings, Jack

Abstract

This study analyses the welfare costs of trade distortions in the exchange of milk quota by simulating potential quota trade for 1992/93 subject to various trade restrictions. Efficient quota allocation, in an unrestricted market, comes about when the price of quota is 0.39 guilders per kilogram in 1992/93 prices. A combination of a floor of 10 thousand kilograms on quota supply and a ceiling of 75 thousand kilograms on quota demand results in an efficiency loss of 2.29 per cent of total profit without trade distortions. Incorporating a margin of 2 per cent between the demand and supply price has a minor effect, the total efficiency loss being 0.13 per cent. Another 0.13 per cent accrues to intermediates in quota trade as transfer costs. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Boots, Maroeska & Oude Lansink, Alfons & Peerlings, Jack, 1997. "Efficiency Loss Due to Distortions in Dutch Milk Quota Trade," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 24(1), pages 31-46.
  • Handle: RePEc:oup:erevae:v:24:y:1997:i:1:p:31-46
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    Cited by:

    1. Elskamp, Rebecca & Hailu, Getu, 2013. "Do Efficient Dairy Producers Purchase Quota?," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149678, Agricultural and Applied Economics Association.
    2. Wieck, Christine & Heckelei, Thomas, 2004. "Development Of Marginal Cost Distributions In Dairy Production Regions Of The Eu," 2004 Annual meeting, August 1-4, Denver, CO 19943, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. David Colman & Michael Burton & Dan Rigby & Jeremy Franks, 2002. "Structural Change and Policy Reform in the UK Dairy Sector," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 645-663, November.
    4. Ang, Frederic & Oude Lansink, Alfons, 2014. "Dynamic profit inefficiency: a DEA application to Belgian dairy farms," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182649, European Association of Agricultural Economists.
    5. Colman, David, 2000. "Inefficiencies in the UK milk quota system," Food Policy, Elsevier, vol. 25(1), pages 1-16, February.
    6. Chernoff, Alex W., 2013. "Between a Cap and a Higher Price: The Dairy Quota Trilemma," Trade Policy Briefs 146977, Canadian Agricultural Trade Policy Research Network.
    7. Shrestha, Shailesh & Hennessy, Thia C., 2008. "A prospect of moving towards free milk quota market in Ireland – will milk quota movement follow efficiency?," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43657, European Association of Agricultural Economists.
    8. Feinerman, Eli & Peerlings, Jack H.M., 2002. "Uncertain Land Availability and Perceived Biases in Investment Decisions: The Case of Dutch Dairy Farms," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24949, European Association of Agricultural Economists.
    9. Thia Hennessy & Shailesh Shrestha & Laurence Shalloo & Michael Wallace, 2009. "The Inefficiencies of Regionalised Milk Quota Trade," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 334-347, June.
    10. Pavel Ciaian & d'Artis Kancs & Jo Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 20-47.
    11. Charlebois, Sylvain, 2016. "Policy-change Triggered Environmental Uncertainty in a Dairy Cooperative: The Case of Mila in South Tyrol," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 7(3), pages 1-13, July.
    12. Bogetoft, Peter & Jensen, Peter Max Friis & Nielsen, Kurt & Olesen, Henrik Ballebye & Olsen, Rene H., 2002. "Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges," Unit of Economics Working Papers 24181, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    13. Hoehl, Stephan & Hess, Sebastian, 2018. "Estimating German Milk Supply Response Using A Global Vectorautoregressive Model," 58th Annual Conference, Kiel, Germany, September 12-14, 2018 275844, German Association of Agricultural Economists (GEWISOLA).
    14. Gardebroek, Cornelis & Oude Lansink, Alfons G.J.M., 2008. "Dynamic Microeconometric Approaches To Analysing Agricultural Policy," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6592, European Association of Agricultural Economists.
    15. Fezzi, Carlo & Bateman, Ian J., 2009. "Structural Agricultural Land Use Modelling," 2009 Conference, August 16-22, 2009, Beijing, China 51423, International Association of Agricultural Economists.
    16. Bezlepkina, Irina V. & Oude Lansink, Alfons G.J.M. & Oskam, Arie J., 2001. "Farm Firm Micro-Econometric Modelling:Empirical Evidence From Russian Dairy Farming," 2001 Annual meeting, August 5-8, Chicago, IL 20464, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Sckokai, Paolo, 2001. "The Common Agricultural Policy In Econometric Models," Working Papers 14800, National Institute of Agricultural Economics, Italy - INEA, Osservatorio Sulle Politiche Agricole dell'UE.
    18. Antonio Alvarez & Carlos Arias & Luis Orea, 2006. "Explaining Differences in Milk Quota Values: The Role of Economic Efficiency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 182-193.
    19. Louhichi, Kamel & Ciaian, Pavel & Espinosa, Maria & Colen, Liesbeth & Perni, Angel & Gomez y Paloma, Sergio, 2015. "EU-wide individual Farm Model for CAP Analysis (IFM-CAP): Application to Crop Diversification Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212155, International Association of Agricultural Economists.
    20. Boere, Esther & Peerlings, Jack & Reinhard, Stijn & Heijman, Wim, 2014. "The dynamics of dairy land use change with respect to the milk quota regime," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182710, European Association of Agricultural Economists.
    21. Levi, Loic & Chavas, Jean-Paul, 2018. "How Does Eliminating Quotas Affect Firm Investment? Evidence from Dairy Farms," 2018 Annual Meeting, August 5-7, Washington, D.C. 273831, Agricultural and Applied Economics Association.

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