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Review of Main Methodological Approaches Quantifying the Economic Effects of the European Milk Quota Scheme

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  • Axel Tonini
  • Ignacio Perez Dominguez

Abstract

This report is based on the outcome of a study carried out by the European Commission's Joint Research Centre - Institute for Prospective Technological Studies (JRC-IPTS, Spain) in cooperation with EuroCARE (Bonn, Germany) and the collaboration of the Agricultural Economics Research Institute (LEI, the Netherlands) and the Catholic University of the Sacred Heart (Unicatt, Italy). The report provides a review the most recent studies modelling the European milk quota. The focus is on milk quota rents, which are a central element in carrying out impact analyses on dairy policies. Direct approaches to estimating milk quota rents are the only option for providing empirically gained estimates to be used in equilibrium models. From the reviewed empirical estimates, it appears that differences in magnitude and rankings are present across the considered studies. This poses serious problems when these estimates are used for calibration, because equilibrium models are highly sensitive to the assumptions made on quota rents. Another difficulty lies in the choice of the length of run used when calibrating. As previously mentioned, equilibrium models are sensitive to the assumptions made on quota rents and different lengths of run may lead to different policy conclusions. Given that the micro-econometric estimation of milk quota rents seems to be an ongoing issue and its translation for equilibrium models far from being settled, it is advisable to perform sensitivity analysis using, whenever possible, different sets of estimates in order to assess the robustness of policy analysis.

Suggested Citation

  • Axel Tonini & Ignacio Perez Dominguez, 2009. "Review of Main Methodological Approaches Quantifying the Economic Effects of the European Milk Quota Scheme," JRC Research Reports JRC53822, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc53822
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC53822
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    References listed on IDEAS

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    1. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1, McMaster University Archive for the History of Economic Thought.
    2. Giancarlo Moschini, 1988. "The Cost Structure of Ontario Dairy Farms: A Microeconometric Analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 36(2), pages 187-206, July.
    3. Christine Wieck & Thomas Heckelei, 2007. "Determinants, differentiation, and development of short‐term marginal costs in dairy production: an empirical analysis for selected regions of the EU," Agricultural Economics, International Association of Agricultural Economists, vol. 36(2), pages 203-220, March.
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    6. Moro, Daniele & Nardella, Michele & Sckokai, Paolo, 2005. "Regional Distribution of Short-Run, Medium-Run and Long-Run Quota Rents Across EU-15 Milk Producers," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24615, European Association of Agricultural Economists.
    7. 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.
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    Cited by:

    1. Jerzy Marzec & Andrzej Pisulewski, 2015. "Analysis of the Economic Activity of Dairy Farms in Poland: Results obtained from the Short-run Cost Function," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 39, pages 167-182.
    2. Witzke, Heinz Peter & Tonini, Axel, 2008. "Dairy reform scenarios with CAPSIM acknowledging quota rent uncertainty," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43654, European Association of Agricultural Economists.
    3. Antonioli, Federico & Santeramo, Fabio Gaetano, 2022. "On Policy Interventions and Vertical Price Transmission: The Italian Milk Supply Chain Case," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 47(2), May.
    4. Antonioli, Federico & Santeramo, Fabio, 2017. "Vertical Price Transmission in Milk Supply Chain: Market Changes and Asymmetric Dynamics," 2017 Sixth AIEAA Conference, June 15-16, Piacenza, Italy 261256, Italian Association of Agricultural and Applied Economics (AIEAA).

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    agriculture; milk quota;

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