Endogenous adjusted Output Quotas - The Abolishment of the Raw Milk Quota in the European Union

This paper discusses an approach to implement output quotas in the GTAP model which permits an endogenous adjustment of both the supplied quantity and the quota rent. Since the quota rent is interpreted as additional earnings of the factors used no change of the worldwide GTAP data base is required. Several modifications of the GTAP model and two exogenous coefficients are necessary. Considering uncertain values of one of the coefficients, systematic sensitivity analysis is applied. The abolishment of the raw milk quota in the European Union would lead to a remarkable decrease in raw milk prices in most member countries. The raw milk production increases in Denmark, Ireland, Luxembourg and the Netherlands while it declines in Greece and Portugal. In the other member countries the raw milk production changes slightly.