AN ANALYSIS OF 1980S DAIRY PROGRAMS AND SOME POLICY IMPLICATIONS

Excessive government purchases of dairy surpluses during the early 1980s prompted three corrective measures: the Milk Diversion Program, Dairy Termination Program, and lower support prices. An eight-equation econometric model of the dairy sector simulates these programs and shows them to be incomplete or impermanent in their effects. However, further analysis shows that a more aggressive policy of lower support prices would be effective in reducing costs to government and consumers, and lowering transfers to producers.