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Deregulation and Productivity: Empirical Evidence on Dairy Production

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  • Fabian Frick
  • Johannes Sauer

Abstract

We investigate productivity development and its relation to resource reallocation effects in the dairy sector in southeast Germany during the phasing-out of the European Union milk quota. We hypothesize that both extreme output price levels and market deregulation fostered efficient reallocation of production resources. We use a farm-level dataset containing financial accounting data for a period of 15 years. Farm-level productivity is estimated by a proxy variable approach that is robust to endogenous input choice. We compare this approach to other estimation techniques as well as an index-based analysis. After aggregation we decompose sector productivity into unweighted mean productivity and a covariance term measuring the allocation of resources toward more productive farms. We observe an increase in the covariance term coinciding with a period of deregulation efforts and volatile milk prices. We seek to find support for our hypotheses by a regression analysis linking the measure for the potential covariance between resource reallocation and productivity on the one hand, and deregulation as well as price variability on the other. In this analysis we find some empirical evidence for the hypotheses.

Suggested Citation

  • Fabian Frick & Johannes Sauer, 2018. "Deregulation and Productivity: Empirical Evidence on Dairy Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 354-378.
    • Handle: RePEc:oup:ajagec:v:100:y:2018:i:1:p:354-378.
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    File URL: http://hdl.handle.net/10.1093/ajae/aax074
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    Citations

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    Cited by:

    1. Hongyun Zheng & Wanglin Ma, 2021. "The role of resource reallocation in promoting total factor productivity growth: Insights from China’s agricultural sector," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 2350-2371, November.
    2. Stefan Wimmer & Johannes Sauer, 2020. "Profitability Development and Resource Reallocation: The Case of Sugar Beet Farming in Germany," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(3), pages 816-837, September.
    3. Kosar, Nataliia & Kuzo, Nataliia & Binda, Jacek & Hayvanovych, Nataliya & Pytulyak, Nataliya, 2022. "Modeling of the factors influencing the dairy market in Ukraine," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 8(3), September.
    4. Jared Hutchins & Yating Gong & Xiaodong Du, 2024. "The role of animal breeding in productivity growth: Evidence from Wisconsin dairy farms," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(1), pages 286-305, January.
    5. Muxuan Li & Jingbin Wang, 2023. "Will “Dual Control of the Amount and Intensity of Energy Consumption (DCEC)” Policy Increase Urban Green Competitiveness?," Sustainability, MDPI, vol. 15(21), pages 1-19, October.
    6. Ioannis Skevas, 2023. "A novel modeling framework for quantifying spatial spillovers on total factor productivity growth and its components," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1221-1247, August.
    7. Youngjune Kim & Ji Yong Lee, 2020. "Effects of Government Payments on Agricultural Productivity: The Case of South Korea," Sustainability, MDPI, vol. 12(9), pages 1-11, April.
    8. Lukáš Čechura & Zdeňka Žáková Kroupová & Irena Benešová, 2021. "Productivity and Efficiency in European Milk Production: Can We Observe the Effects of Abolishing Milk Quotas?," Agriculture, MDPI, vol. 11(9), pages 1-21, August.
    9. Emir Malikov & Gudbrand Lien, 2021. "Proxy Variable Estimation of Multiproduct Production Functions," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1878-1902, October.
    10. Maria Martinez Cillero & Michael Wallace & Fiona Thorne & James Breen, 2021. "Analyzing the Impact of Subsidies on Beef Production Efficiency in Selected European Union Countries. A Stochastic Metafrontier Approach," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1903-1923, October.
    11. Doris Läpple & Colin A. Carter & Cathal Buckley, 2022. "EU milk quota abolition, dairy expansion, and greenhouse gas emissions," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 125-142, January.
    12. Ait Sidhoum, Amer & Mennig, Philipp & Frick, Fabian, 2024. "Assessing the impact of agri-environmental payments on green productivity in Germany," Ecological Economics, Elsevier, vol. 219(C).
    13. Christian Stetter & Johannes Sauer, 2022. "Greenhouse Gas Emissions and Eco-Performance at Farm Level: A Parametric Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(3), pages 617-647, March.
    14. Biagini, L. & Antonioli, F. & Severini, S., 2023. "The impact of CAP subsidies on the productivity of cereal farms in six European countries: A historical perspective (2008–2018)," Food Policy, Elsevier, vol. 119(C).
    15. Garcia, Luis & Laepple, Doris & Dillon, Emma & Thorne, Fiona, 2020. "The role of hired labor in transient and persistent technical efficiency on Irish dairy farms," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304395, Agricultural and Applied Economics Association.
    16. 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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