Dairy farms without quotas in Belgium: estimation and simulation with a flexible cost function

This paper evaluates the farm-level supply and income effects from removing milk quotas and reducing producer prices with increasing direct compensatory payments. Using a panel of Belgian dairy farms, we first estimate a multi-output multi-input flexible cost function that generates a U-shaped marginal cost curve for each farm of the sample. We then embed each farm cost function in a profit-maximisation programming model that is built and calibrated for each farm in the sample. Accounting for farm heterogeneity, the simulations show how dairy farms without quotas may respond differently to cha... Mehr ...