| Abstract: | The paper estimates the impact of milk quotas on the UK economy using a modified SAM-based Leontief model. Since milk quotas involve the control of gross output as opposed to final demand, it is argued that the traditional form of a Leontief model needs to be adapted so as to make the output of dairy producers exogenous to the system. Modifications to both the demand-driven and supply-driven Leontief model are suggested thus allowing the estimation of both the backward and forward linkage effects of quotas. The results suggest that, in total, the backward linkage effects of milk quotas are more significant than the forward linkage effects, with the magnitude of the latter constrained by the pattern of milk marketing. Taking both types of linkages into account, it is estimated that the potential 3 per cent further reduction in quota levels being discussed in the context of CAP reform threatens a total of 11,000 jobs in the economy. |
