How has the EU milk quota affected patterns of herd-size change?

This paper analyses the impact of milk quotas on the size structure of dairy herds in two major EU milk-producing member states, Germany and the Netherlands, using Markov chain models. Four mobility indicators characterising structural change are developed and calculated. Structural change in the dairy sector as measured by the mobility measures is found to be affected by the milk quota scheme. In the quota period, mobility out of dairying is lower, but the overall and upward mobility increase. This effect is stronger in the Netherlands than in West Germany.