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Abstract

An econometric framework for estimating a two-regime dairy structural system is presented. Failure to account for switching between regimes due to government price intervention raises the problem of selectivity bias. Further, since a structural system of equations is involved, the problem is not limited to the market associated with the intervention. Rather, bias from a single source can distort all equations in the system. The ramifications of not correcting for the bias in policy analyses are investigated.

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