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Explaining Differences in Milk Quota Values: The Role of Economic Efficiency

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  • Alvarez, Antonio
  • Arias, Carlos
  • Orea, Luis

Abstract

This paper explores the relationship between milk quota values and economic efficiency in order to analyze current government interventions in quota allocations among producers. For this purpose, we estimate a short-run variable cost function using a panel of Spanish dairy farms. Quota values are then decomposed into economic efficiency, price, and scale effects in order to assess the relative influence of these factors on quota values. We find that efficiency is important in explaining quota values but is uncorrelated with observable farm characteristics. This casts doubts on the government’s ability to allocate quotas to efficient farms in the way a well-functioning quota market does.

Suggested Citation

  • Alvarez, Antonio & Arias, Carlos & Orea, Luis, 2004. "Explaining Differences in Milk Quota Values: The Role of Economic Efficiency," Efficiency Series Papers 2004/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
  • Handle: RePEc:oeg:wpaper:2004/01
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    References listed on IDEAS

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    Citations

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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. Thia Hennessy & Shailesh Shrestha & Laurence Shalloo & Michael Wallace, 2008. "The Inefficiencies of Regionalised Trade of Milk Quota," Working Papers 0811, Rural Economy and Development Programme,Teagasc.
    3. 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.
    4. Van der Straeten, Bart & Buysse, Jeroen & Nolte, Stephan & Lauwers, Ludwig H. & Claeys, Dakerlia & Van Huylenbroeck, Guido, 2011. "Policy intervention in a concentration permit market: efficiency analysis of obligatory manure processing in Flanders," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114832, European Association of Agricultural Economists.
    5. 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.
    6. Maurice Doyon & Virginie Simard & Kent D. Messer & Lota D. Tamini & Harry M. Kaiser, 2008. "An Experimental Analysis of Modifications to the Centralized Milk Quota Exchange System in Quebec," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(3), pages 295-312, September.
    7. Sauer, Johannes, 2008. "Quota Deregulation and Organic versus Conventional Milk – A Bayesian Distance Function Approach," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6425, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Frederic Ang & Alfons Oude Lansink, 2018. "Decomposing dynamic profit inefficiency of Belgian dairy farms," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 45(1), pages 81-99.
    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. Alfons Oude Lansink & Arno Van Der Vlist, 2008. "Non‐Parametric Modelling of CO2 Emission Quota," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 487-497, September.
    11. Johannes Sauer, 2010. "Deregulation and dairy production systems: a Bayesian distance function approach," Journal of Productivity Analysis, Springer, vol. 34(3), pages 213-237, December.
    12. Maria Martinez Cillero & Fiona Thorne & Michael Wallace & James Breen & Thia Hennessy, 2018. "The Effects of Direct Payments on Technical Efficiency of Irish Beef Farms: A Stochastic Frontier Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(3), pages 669-687, September.
    13. Sauer, J., 2009. "Quota Deregulation and Organic versus Conventional Milk – A Bayesian Distance Function Approach," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 44, March.
    14. Maurice Doyon & Lota Tamini & Virginie Simard & Kent Messer & Harry M. Kaiser, 2006. "L'économie expérimentale pour l'analyse de modifications au système centralisé de vente du quota laitier au Québec," CIRANO Working Papers 2006s-23, CIRANO.
    15. Casasnovas, Valero L. & Aldanondo, Ana Maria, 2011. "Influence of Animal Feeding on Milk Supply in Navarre," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114316, European Association of Agricultural Economists.

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