Comparative Advantage and the Impact of Government Intervention Policy in Dairy Production in Iraq

Abstract

Food industry is a major element of the economy because of its ability and effectiveness to revive and stimulate the overall economic processes in the country to produce milk and enhance the value surplus. Food industries are characterized by their capacity, multiplicity of patterns, and techniques and complexity of the various processes. The dairy industry is one of the branches of the important food industry, as it works to improve the health status of the population and give rural people wide opportunities for work and reduce unemployment rates. The aim of the research is to shed light on dairy industry to investigate comparative advantage in Iraq and its local efficiency as well as to know impact of the policy of government intervention. Policy analysis matrix (PAM) has shown that the value of the cost factor of the local supplier (DRC) is (0.54) which is less than one. This means that dairy production has a comparative advantage of utilizing local resources and that this production is socially profitable. The also study conducted sensitivity analysis by imposing a 10% increase in costs for traded inputs as well as reducing revenue by border prices for one ton of production. After calculating the transactions for both cases, the interpretation of coefficients did not change. The study concluded that dairy projects in Iraq for the sample in the period of study was profitable in terms of both private and social prices and there is a comparative advantage according to the domestic resource cost which was less than one.