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Quotas without Supply Control: Effects of Dairy Quota Policy in California
Author(s) -
Sumner Daniel A.,
Wolf Christopher A.
Publication year - 1996
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243708
Subject(s) - production (economics) , welfare , order (exchange) , economics , milk production , business , control (management) , agricultural economics , microeconomics , market economy , finance , zoology , management , biology
Unlike the federal milk marketing order system, California's system includes a milk quota program. Oddly, this quota restricts neither production nor marketing. In aggregate, the quota program leads to more milk production than a typical marketing quota, but less milk than blend pricing without the quota. The California program generates more producer surplus and smaller welfare losses than a federal‐style program without quota. When class 1 milk sales expand, production expands less under the quota program than with blend pricing without a quota. Finally, increases in aggregate quota lower production because they lower the marginal price of milk facing producers.