The effect of supply management on herd size in Alberta dairy

A supply management program limits the aggregate supply of a commodity, often through the use of marketable quota licenses. The static, aggregate welfare effects of supply controls are well known, but the farm-level, dynamic effects on dairy investment are not. A theoretical cost-of-adjustment model...

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Bibliographic Details
Published in:American journal of agricultural economics 1997-05, Vol.79 (2), p.555-565
Main Authors: Richards, Timothy J., Jeffrey, Scott R.
Format: Article
Language:English
Subjects:
ADAPTATION DE LA PRODUCTION
Adjustment costs
ADJUSTMENT OF PRODUCTION
Agricultural economics
Agricultural management
Agricultural productivity
Agriculture
AJUSTE AGRARIO
ALBERTA
Canada
Cattle
COACCION
CONSTRAINTS
CONTRAINTE
COSTOS DE PRODUCCION
COUT DE PRODUCTION
dairy
Dairy cattle
Dairy farming
DAIRY FARMS
Dairy herd management
Dairy industry
dynamic duality
Dynamic modeling
DYNAMIC MODELS
Economics
EXPLOITATION LAITIERE
FARM INPUTS
GRANJAS LECHERAS
Herds
INSUMOS AGRICOLAS
INVERSIONES
INVESTISSEMENT
INVESTMENT
Investments
LICENCES
LICENCIAS
Mathematical expressions
Milk
MILK PRODUCTION
MODELE DYNAMIQUE
MODELOS DINAMICOS
MOYEN DE PRODUCTION AGRICOLE
PERMIS
PRODUCCION LECHERA
PRODUCTION CONTROLS
PRODUCTION COSTS
PRODUCTION LAITIERE
Q110
QUASI-FIXED INPUTS
QUOTAS
REGLAMENTACIONES
REGLEMENTATION
REGULACION DE LA PRODUCCION
REGULATION DE LA PRODUCTION
REGULATIONS
Supply
Supply management
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Description
Summary:A supply management program limits the aggregate supply of a commodity, often through the use of marketable quota licenses. The static, aggregate welfare effects of supply controls are well known, but the farm-level, dynamic effects on dairy investment are not. A theoretical cost-of-adjustment model is used to show that supply management reduces the rate of quasi-fixed input adjustment at the farm level. In fact, when a quasi-fixed input is complementary to quota licenses, investment or disinvestment can be impaired to such an extent that the input moves away from the long-run equilibrium. As a result, overinvestment in this input can significantly reduce productivity growth.
ISSN:0002-9092
1467-8276
DOI:10.2307/1244152