Who Exits from a Reforming Sector? The Case of Dairy Farmers in Israel

We analyze the responses of dairy farmers in Israel to an institutional reform that allowed, for the first time, for buying and selling of production quotas, and provided financial incentives for such quota trading. Larger producers were less likely to sell quota and exit but also less likely to expand, indicating that the incentives were most effective for smaller farms who had to choose between exit and expansion. The existence of a successor reduced the exit probability, while farmers working off the farm were more likely to expand by buying additional quota