Effects of EU dairy policy reform for Dutch dairy farming: a primal approach using GMM estimation

This paper estimates a production function for milk using a generalised method of moments estimator to avoid the endogeneity problem. Using the first-order conditions for profit maximisation, the economic effects for individual Dutch dairy farms of the 2003 EU dairy policy reform are analysed. With...

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Bibliographic Details
Published in:European review of agricultural economics 2005-12, Vol.32 (4), p.517-537
Main Authors: Ooms, D.L, Peerlings, J.H.M
Format: Article
Language:English
Subjects:
Agrarian reform
Agrarische Economie en Plattelandsbeleid
Agricultural economics
Agricultural Economics and Rural Policy
Agricultural Economics and Rural Policy Group
Agricultural policy
Agriculture
Area studies
Butter
Common Agricultural Policy
dairy farming
Dairy farms
Dairy industry
dairy policy
Dairy products
Economic models
Economic statistics
Economic theory
Estimating techniques
estimation
European Union
farm household income
Farming
generalised method of moments
Generalized method of moments
generalized method of moments estimator
Impact analysis
Leerstoelgroep Agrarische economie en plattelandsbeleid
Market prices
MGS
Milk
milk prices
milk production
milk quota
Netherlands
policy analysis
production function
Production functions
Profits
Reforms
Shadow prices
simulation models
Studies
Variables
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Description
Summary:This paper estimates a production function for milk using a generalised method of moments estimator to avoid the endogeneity problem. Using the first-order conditions for profit maximisation, the economic effects for individual Dutch dairy farms of the 2003 EU dairy policy reform are analysed. With an expected milk price decrease of 21 per cent, profit decreases on average by 22 per cent. EU direct payments compensate for roughly 53 per cent of this fall in profit. The profit reduction means that 69 per cent of all small farms have negative income from farming, compared with 15 per cent in the initial situation.
ISSN:0165-1587
1464-3618
DOI:10.1093/erae/jbi024