@article{Vanzetti:152177,
      recid = {152177},
      author = {Vanzetti, David and Setyoko, Nur Rakhman and Oktaviani,  Rina},
      title = {Drink More Milk: Policies Supporting the Indonesian Dairy  Industry},
      address = {2013-02},
      number = {424-2016-27123},
      pages = {17},
      year = {2013},
      abstract = {The Indonesian Government believes that milk is good for  health, particularly infant
health, and has a campaign to  encourage consumption of fresh milk. At present per  capita
consumption of fresh milk, at 12 litres per head per  annum, is very low and the
Government hopes to double it.  Fresh milk is little traded internationally so one of  the
consequences of encouraging consumption is to support  the local dairy industry at the
expense of domestic and  imported suppliers of milk powder and other substitutes.
On  the supply side milk production per cow is also low by  international standards, at
3,070 litres a year. The  Government has policies to increase both the number of  dairy
cattle and productivity, and ultimately to achieve  self-sufficiency. There are also in place
tariffs of 5-10  per cent on dairy product imports, but some of these are  scheduled to be
removed under existing free trade  agreements.
A computable general equilibrium model, GTAP,  is used to estimate the impact of the
fresh milk campaign,  the removal of tariffs, and increases in production and  productivity.
The fresh milk campaign is modelled as a  consumption tax to bring about a given change
in domestic  demand. The closure is switched to endogenise the tax. A  production shift is
modelled as an output subsidy, and a  productivity shift as an exogenous output  enhancing
productivity shock. No attempt is made to measure  the benefits of drinking fresh milk,
although these are  presumed to be positive.
The results suggest supply side  policies predominantly benefit consumers and demand
side  shocks benefit producers to a greater degree. Faced with  constant and inelastic
demand, a production increase drives  down prices by more than the change in output. The
removal  of tariffs on dairy products would not be beneficial for  Indonesian producers. However, producers would benefit from  a shift in demand brought about by the fresh
milk campaign  and from a taxpayer funded output subsidy.
From a consumer  perspective, the fresh milk campaign would drive up the  price, so
existing fresh milk consumers would be worse off.  However, supply side policies would
provide benefits to  consumers. Both a subsidy on milk producers and a  productivity
improvement would result in lower prices to  consumers. Likewise, the elimination of
tariffs benefits  consumers, although not those who wish to drink fresh  milk.
The fresh milk campaign is likely to prove beneficial  but it remains to be seen how
effective it may be, the cost  involved, and the magnitude of the health benefits.},
      url = {http://ageconsearch.umn.edu/record/152177},
      doi = {https://doi.org/10.22004/ag.econ.152177},
}