EFFICIENCY OF SUPPLY CONTROL PROGRAMS IN INCOME-REDISTRIBUTION

This article evaluates the efficacy of alternative supply control measures in the Finnish dairy market. The capability of measures to reduce excess supplies with the least losses to producers is illustrated by the surplus transformation model. With small income transfers, the prevailing quota system is more efficient than price regulation in income redistribution. However, a considerable improvement in consumer-taxpayer welfare can be reached by price reduction only. The applicability of consumer subsidies suffers from inelastic demand for milk. The results support the argument that producers' strong political influence enables them to avoid the most unfavourable policy choices.