Abstract

The abolition of milk quota fuels environmental concerns in the Netherlands. A microeconomic model is developed to analyse the technical relations between milk, roughage and manure production. Production functions for milk, feed and roughage are estimated based on milk quota and manure constraints. Together with an equation for manure production these are used to calculate the costs and benefits of dairy livestock expansion. It turns out that at the margin and at prevailing input and output prices and manure processing costs, it will be attractive for dairy farms to expand production, unless regulatory constraints prevent them from doing so.

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