| Abstract: | Research on milk supply response has previously concentrated on changes in the national herd and changes in yield. It is argued that this does not provide a sound foundation for understanding the secular increase in milk output given generally declining real milk prices. A recent theory of farm size is outlined and adapted to explain changes in dairy herd size. The herd size determinants are the relative costs of labour and capital. The theory is used to specify equations which are estimated to explain changes in the number of herds, the average size of herds, and yields in England and Wales 1964–1982. |
