Louis-Pascal Mahé

Modelling a Siphon on quota transfers: An application to milk in France

Abstract This note extends analyses by Burrell and Swinbank & Peters on the consequences of imposing a siphon on a market for quotas. A siphon is a tax in kind levied on exchanged quota licences so as to generate rights which could be transferred to some specific producers and new entrants. A framework based on a micro‐economic model of producer behaviour in a tradable quota regime is developed to derive supply and demand functions for leased quota rights at the industry level. The three schemes for the siphon defined by Burrell are further examined in terms of price, quantity and welfare effects. The model is applied to the case of milk quotas in France on the basis of a sample of dairy farmers for the year 1991.