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The Welfare Economics of Dismantling Dairy Quota in a Confederation of States

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  • G. Cornelis van Kooten

Abstract

Supply-restricting marketing boards shift the costs of agricultural support payments from the treasury to consumers. Canada, Australia and the European Union adopted quota regimes in dairy, but Australia and the EU subsequently dismantled their programs, while providing milk producers with compensation, but the dairy quota system remains entrenched in Canada. In this paper, dairy policies in the aforementioned jurisdictions, plus the U.S. and New Zealand are reviewed, and a stylized description of the EU reform is provided. An applied welfare economics framework based on the EU experience is then used to investigate potential mechanisms for reforming Canada’s dairy quota regime. The main issue regards producers’ compensation. The analysis shows that one has to be careful not to overcompensate producers, which could make a reform program prohibitively expensive on the treasury. The analysis provides a framework within which policy discussions regarding compensation can take place.
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Suggested Citation

  • G. Cornelis van Kooten, 2017. "The Welfare Economics of Dismantling Dairy Quota in a Confederation of States," Working Papers 2017-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    • Handle: RePEc:rep:wpaper:2017-04
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    References listed on IDEAS

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    More about this item

    Keywords

    supply management; quota buyback programs; compensation; welfare measurement;
    All these keywords.

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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