Milk Marketing Order Winners and Losers

Abstract

AbstractDetermining the impacts on consumers of governmental policies that affect the demand for food products requires a theoretically consistent micro‐level demand model. We estimate a system of demands for weekly city‐level dairy product purchases by nonlinear three‐stage least squares to account for joint determination between quantities and prices. We analyze the distributional effects of federal milk marketing orders, and find results that vary substantially across demographic groups. Families with young children suffer, while wealthier, childless couples benefit. We also find that households with lower incomes bear a greater regulatory burden due to marketing orders than those with higher income levels.