Minimum price policy impact in the Tunisian dairy sector, Journal of Agribusiness in Developing and Emerging Economies

Tunisia - 14 April 2020

Trade topics: Agricultural Trade

The objectives of this article published in Journal of Agribusiness in Developing and Emerging Economies are to develop a partial equilibrium model for a dairy sector according to two approaches—“Quantity Formulation” and “Price Formulation”—and to show their equivalence under the assumption of perfect competition. We introduce the spatial dimension to present the“Price Formulation” approach of models developed by Bouamra et al. (1998) and Abbassi et al. (2008) . We illustrate theoretically and numerically how to incorporate the minimum price policy at the farm level for the Tunisian dairy sector according to the Price Formulation approach. We analysed two scenarios of removal of minimum price policy that differ according to the values of farm supply elasticity. The simulation results show that producers stand to lose between 78.6 and 127.8 million Dinars in surplus depending on the value of farm supply elasticity. Permit holders’ rent would also decrease between 0.8 and 1.3 million Dinars. However, consumers’ surplus is predicted to increase between 67.8 and 110.1 million Dinars compared with the baseline solution. The overall welfare implications of removal of minimum price policy are negative and range between 13.3 and 18.2 million Dinars.