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Abolition of Raw Milk Quota in the European Union: A CGE Analysis at the Member Country Level

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  • Markus Lips
  • Peter Rieder

Abstract

This paper discusses a generic approach to implementing production quotas in an applied general equilibrium framework. The quota rent is interpreted as additional primary factor payments. We analyse the abolition of the raw milk quota and the elimination of export subsidies for dairy products in the European Union at a member country level. The raw milk output increases in Denmark, Ireland, Italy, Luxembourg, the Netherlands and Spain, while it declines in Germany, Greece, Portugal and Sweden. The EU‐wide effect for raw milk production is an output increase of 3% and a price decline of 22%. To assess the robustness of the critical assumption about the raw milk quota rent we apply Arndt and Pearson's Systematic Sensitivity Analysis.

Suggested Citation

  • Markus Lips & Peter Rieder, 2005. "Abolition of Raw Milk Quota in the European Union: A CGE Analysis at the Member Country Level," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(1), pages 1-17, March.
    • Handle: RePEc:bla:jageco:v:56:y:2005:i:1:p:1-17
    DOI: 10.1111/j.1477-9552.2005.tb00119.x
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    References listed on IDEAS

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    1. Arndt, Channing, 1996. "An Introduction To Systematic Sensitivity Analysis Via Gaussian Quadrature," Technical Papers 28709, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Bach, Christian Friis & Ken Pearson, 1996. "Implementing Quotas in GTAP Using GEMPACK or How to Linearize an Inequality," GTAP Technical Papers 307, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. W. Jill Harrison & Mark Horridge & K.R. Pearson & Glyn Wittwer, 2004. "A Practical Method for Explicitly Modeling Quotas and Other Complementarities," Computational Economics, Springer;Society for Computational Economics, vol. 23(4), pages 325-341, June.
    4. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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