The 'Milk Quotas Rent Puzzle' in the EU: Economic Significance, Review, and Policy Relevance

In the so-called Common Agricultural Policy (CAP) 'Health Check' the European Commission has recently proposed gradual transitional measures to allow a 'soft landing' of the milk sector to quota expiry. The aim of this paper is to help policy makers gain better insights in the implications of some of the most important economic assumptions and empirical choices made in partial equilibrium models focusing on dairy. Three partial equilibrium models are considered: the Agricultural Member states MODeling (AGMEMOD) model, the Common Agricultural Policy SIMulation (CAPSIM) model, and the European Dairy Industry Model (EDIM). This paper analyses how the economic supply components, as they are part of the three analysed key dairy models, affect milk output projections. A main conclusion is that the evaluation of the contribution of a study should not be based on one single characteristic (such as quota rents, supply responses). One isolated characteristic cannot explain finally obtained model outcomes. Quota rents, supply responses, shifters and the demand side have to be integrated with each other.

TONINI Axel;  JONGENEEL Roel; 

2009-07-21

Research in Agricultural and Applied Economics

JRC48469

http://ageconsearch.umn.edu/handle/44796,    https://publications.jrc.ec.europa.eu/repository/handle/JRC48469,