Deregulation of the Norwegian Market for Milk Products.

In this paper we use a price endogenous mathematical model to estimate the national welfare losses induced by the Norwegian dairy policy. Firstly, we focus on welfare losses at the processing level due to price discrimination between different uses of the milk and cross-subsidization of export. Secondly, we focus on inefficiency at the farm level due to small scale farm units and a distribution of production which does not reflect regional comparative advantages. Thirdly, we demonstrate that employment in rural areas can be upheld at far lower costs if the processing industry is deregulated and the rural farmers are supported through more direct payments.