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Between a cap and a higher price: Modelling the price of dairy quotas under price ceiling legislation
Author(s) -
Chernoff Alex W.
Publication year - 2015
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12153
Subject(s) - counterfactual thinking , economics , liberalization , computable general equilibrium , legislation , price elasticity of supply , reservation price , ceiling (cloud) , price elasticity of demand , microeconomics , agricultural economics , market economy , physics , meteorology , political science , law , philosophy , epistemology
This paper considers various policy alternatives to price ceiling legislation in the market for production quotas in the dairy farming sector in Quebec. I develop a model of farmers’ demand for quotas and estimate a structural parameter that is required for the counterfactual experiments. Using my econometric results and the modelled equilibrium price, I estimate the price of dairy quotas over the period 1993–2011. The counterfactual experiments indicate that the price of quotas could be reduced to the ceiling price through a 4.16% expansion of the aggregate supply of quotas, or through moderate trade liberalization of Canadian dairy products.