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The Swiss payment for milk processed into cheese: ex post and ex ante analysis
Author(s) -
Finger Robert,
Listorti Giulia,
Tonini Axel
Publication year - 2017
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12345
Subject(s) - raw milk , payment , welfare , ex ante , production (economics) , agricultural science , business , economics , counterfactual thinking , agricultural economics , food science , microeconomics , environmental science , chemistry , finance , market economy , macroeconomics , philosophy , epistemology
Abstract We make use of both an ex post and an ex ante evaluation to analyze the Swiss payment for milk processed into cheese. This payment for each kilogram of raw milk processed into cheese is issued to milk producers through dairy processors. In the ex post evaluation, by applying a vector autoregressive model, we estimate the effects of reductions of the payment for prices of raw milk used to produce Emmentaler, Gruyère, and industrial cheese. Past declines in the payment have only been partially transmitted to raw milk prices. The rate of transmission is higher for milk used for the production of industrial cheese than for artisan cheeses. In the ex ante impact evaluation, we use a partial equilibrium model and develop a counterfactual scenario in which the payment is removed. The payment for milk processed into cheese is found to have effects on cheese production and exports but also has important indirect effects on other dairy products. Our findings suggest that about two‐thirds of the payment are benefiting milk producers. At the same time, the overall welfare losses resulting from the elimination of the aid are smaller than the budget allocated to this measure, suggesting a net welfare gain from elimination.