Dairy disaggregation and joint production in an economy-wide model
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We examine the impact of dairy disaggregation and joint production on trade liberalisation
outcomes in an economy-wide model. Depending on parameterisation, our
model includes either (i) a single dairy commodity, (ii) several dairy commodities without
joint production or (iii) several dairy commodities with joint production. In a
numerical application, we consider the removal of US tariffs on dairy exports from
New Zealand (the world’s largest dairy exporter). We show that failing to account for
joint production when dairy commodities are disaggregated leads to misleading
results. Our preferred dairy production function differs from those used in other
applied trade models. Our analysis can be used to determine when accounting for joint
production in other sectors is important.