The impact of the Northeast Dairy Compact on New England consumers: A report from the milk policy wars

Authors

  • Ronald W. Cotterill

    1. Food Marketing Policy Center, Department of Agriculture and Resource Economics, University of Connecticut, Storrs, CT 06249–4021
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Abstract

This paper presents a comparative analysis of three different economic studies that played major roles in the policy debate over the Compact. It draws an important distinction between before and after analysis and counterfactual impact analysis and highlights constraining assumptions in models. Over time, the Compact increased raw milk price 2–3 cents per gallon, but if the Compact had not been in place during the first three years of its operation, raw milk prices would have been approximately 10 cents lower. Over time, retail prices went up by much more than 2–3 cents because other costs increased and channel firms increased tacit collusion and net profits. Studies give different counterfactual estimates for retail prices without the Compact. They range from a drop of 5.7 cents per gallon to 20.7 cents per gallon and are very sensitive to modeling approach. Comparative analysis, as done in this article, should contribute to policy formulation rather than appearing ex post. [EconLit citations: L66 L11 L13]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 455–471, 2005.

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