Cornerstones and Intersections of the Dairy Industry: Regulation, Labor, and Demand

The dairy industry, directly and indirectly, contributes $753 billion and 3.3 million American jobs to the economy. Dairy by itself directly contributes 1.1 percent to the U.S. GDP. In this dissertation, we look at three cornerstones of the dairy industry: regulation, labor, and demand. In Chapter 2, we first look at a general regulatory theory based on current dairy regulations and we test the theory using an experiment. We find both theoretically and experimentally that regulation can beget a win-win situation for both buyers and sellers. In Chapter 3, we switch gears and look at the supply side of the dairy industry, focusing on the wages for dairy farm laborers. We find that both agglomeration and immigration enforcement impact dairy farm laborers’ wage rates. In particular, we find agglomeration increases the wage rate, as we expect. But that in industries, like dairy, where there are a large immigrant workforce, immigration enforcement reduces the wage rate. Next in Chapter 4, we pivot and analyze the regional demand for finished dairy products using IRI scanner data. Here we find using scanner data provides us a detailed look at regional demand for dairy products. Finally in Chapter 5, we study the intersection of these three cornerstones in a linear programming multi-commodity model. This chapter uses the knowledge gained in Chapters 3 and 4 to update the data and add supply and demand curves to a model that has a long standing history in the dairy industry. We then use this updated model to test the theory outlined in Chapter 2, and find that in this multi-commodity model the regulatory scenario is more efficient than the unregulated scenarios.