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Minimum price policy impact in the Tunisian dairy sector

Abdessalem Abbassi (Department of Economics, Faculty of Economics and Management of Nabeul, Laboratory of Economic and Institutional Environment of the Firm (ENVIE), University of Carthage, Tunis, Tunisia) (Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE), Université Laval, Québec, Canada)
Ahlem Dakhlaoui (Department of Industrial Economics, Polytechnic School of Tunisia, Laboratory of Economics and Management (LEGI), University of Carthage, Tunis, Tunisia) (Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE), Université Laval, Québec, Canada)
Lota D. Tamini (Department of Agricultural Economics and Consumer, Science and Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE), Université Laval, Québec, Canada)

Journal of Agribusiness in Developing and Emerging Economies

ISSN: 2044-0839

Article publication date: 16 April 2020

Issue publication date: 29 September 2020

90

Abstract

Purpose

The purpose of this paper is to develop a partial equilibrium model for the Tunisian dairy sector according to “quantity formulation” and “price formulation” and to show their equivalence under the assumption of perfect competition.

Design/methodology/approach

This model incorporates domestic policies, that is, producers' price support and subsidies to milk collection centres and trade policies, that is, TRQ and ad valorem tariffs. The authors 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.

Findings

Two scenarios for the removal of a minimum price policy are analysed and show that producers' surplus loss varies between 78.6 and 127.8 million dinars. The overall welfare implications of removing a minimum price policy are negative and range between 13.3 and 18.2 million dinars.

Research limitations/implications

This study could not include all of the detailed factors in the Tunisian dairy sector.

Originality/value

Based on the numerical results obtained in the study, the authors recommend that public authorities maintain the minimum price policy because it prevents a decrease in raw milk producers' surplus. Moreover, this policy is effective because it generates excess raw milk production, estimated at 28.23% in 2010, that can be used for various homemade dairy products. Under an effective minimum price policy, the formal processing sector absorbs all the excess raw milk only if the public authorities allocate grants to encourage investment in new milk collection centres and in milk drying equipment, especially in disadvantaged rural regions. The latter economic policy coupled with a minimum price policy not only guarantees a higher income for raw milk producers but also may represent a development factor for underprivileged rural areas.

Keywords

Acknowledgements

The authors would like to thank the editor and the anonymous referees of the journal of agribusiness in developing and emerging Economies. The authors gratefully acknowledge the financial support from the World Trade Organization chair at ESSEC Tunis, Tunisia.

Citation

Abbassi, A., Dakhlaoui, A. and Tamini, L.D. (2020), "Minimum price policy impact in the Tunisian dairy sector", Journal of Agribusiness in Developing and Emerging Economies, Vol. 10 No. 5, pp. 573-586. https://doi.org/10.1108/JADEE-05-2019-0077

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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