Abstract
We review some of the most significant issues and results on the economic effects of genetically modified (GM) product innovation, with emphasis on the question of GM labeling and the need for costly segregation and identity preservation activities. The analysis is organized around an explicit model that can accommodate the features of both first-generation and second-generation GM products. The model accounts for the proprietary nature of GM innovations and for the critical role of consumer preferences vis-à-vis GM products, as well as for the impacts of segregation and identity preservation and the effects of a mandatory GM labeling regulation. We also investigate briefly a novel question in this setting, the choice of “research direction” when both cost-reducing and quality-enhancing GM innovations are feasible.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Akerlof, G.A. 1970. “The Market for Lemons: Quality Uncertainty and the Market Mechanism.” Quarterly Journal of Economics 84(3): 488–500.
Bender, K., L. Hill, B. Wenzel, and R. Hornbaker. 1999. “Alternative Market Channels for Specialty Corn and Soybeans.” Report No. AE-4726, Department of Agricultural Economics, University of Illinois.
Buckwell, A., G. Brookes, and D. Bradley. 1999. “Economics of IP for Genetically Modified Crops.” Report for Food Biotechnology Communication Initiative (FBCI), London.
Bullock, D., and M. Desquilbet. 2002. “The Economics of Non-GMO Segregation and Identity Preservation.” Food Policy 27(1): 81–99.
Carter, C, and G.P. Gruère. 2003. “International Approaches to the Labeling of Genetically Modified Foods.” Choices (2nd quarter): 1–4.
Crespi, J.M., and S. Marette. 2003. “ ‘Does Contain’ vs. ‘Does Not Contain’: Does It Matter Which GMO Label Is Used?” European Journal of Law and Economics 16(3): 327–344.
European Union. 2004. “Question and Answers on the Regulation of GMOs in the EU.” MEMO/04/85, European Union, Brussels (April 15).
Falck-Zepeda, J.B., G. Traxler, and R.G. Nelson. 2000. “Surplus Distribution from the Introduction of a Biotechnology Innovation.” American Journal of Agricultural Economics 82(2): 360–369.
Fulton, M., and K. Giannakas. 2004. “Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes,” American Journal of Agricultural Economics 86(1): 42–60.
Furtan, W.H., R.S. Gray, and J.J. Holzman. 2003. “The Optimal Time to License a Biotech ‘Lemon’.” Contemporary Economic Policy 21(4): 433–444.
Gaskell. G., N. Allum, and S. Stares. 2003. “Europeans and Biotechnology in 2002.” Euro-barometer 58.0. Report to the EC Directorate General for Research (March).
Golan, E., F. Kuchler, and L. Mitchell. 2001. “Economics of Food Labeling.” Journal of Consumer Policy 24(2): 117–184.
Grossman, S. 1981. “The Informational Role of Warranties and Private Disclosure about Product Quality.” Journal of Law and Economics 24(3): 461–483.
Huffman, W.E., J.F. Shogren, M. Rousu, and A. Tegene. 2003. “Consumer Willingness to Pay for Genetically Modified Food Labels in a Market with Diverse Information: Evidence from Experimental Auctions.” Journal of Agricultural and Resource Economics 28(3): 481–502.
James, C. 2005. “Preview: Global Status of Commercialized Biotech/GM Crops: 2004.” 2005. ISAAA Brief No. 32-2004, International Service for the Acquisition of Agri-Biotech Applications, Ithaca, NY.
Laffont, J.-J., and J. Tirole. 1993. A Theory of Incentives in Procurement and Regulation. Cambridge, MA: MIT Press.
Lapan, H., and G. Moschini. 2001. “GMO Labeling and Trade: Consumer Protection or (Just) Protectionism?” Paper presented at the International Agricultural Trade Research Consortium (IATRC) conference entitled “Globalization, Biotechnology and Trade,” Tucson, AZ (December).
____. 2004. “Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products.” American Journal of Agricultural Economics 86(3): 634–648.
Moschini, G., and H. Lapan. 1997. “Intellectual Property Rights and the Welfare Effects of Agricultural R&D.” American Journal of Agricultural Economics 79(4): 1229–1242.
Moschini, G., H. Lapan, and A. Sobolevsky. 2000. “Roundup Ready Soybeans and Welfare Effects in the Soybean Complex.” Agribusiness 16(1): 33–55.
Mussa, M., and S. Rosen. 1978. “Monopoly and Product Quality.” Journal of Economics Theory 18(2): 301–317.
Noussair, C, S. Robin, and B. Ruffieux. 2004. “Do Consumers Really Refuse to Buy Genetically Modified Food?” Economic Journal 114(492): 102–120.
Pew Initiative on Food and Biotechnology. 2001. Harvest on the Horizon: Future Uses of Agricultural Biotechnology. Pew Initiative on Food and Biotechnology, Washington, D.C. Available online at http://pewagbiotech.org/research/harvest/harvest.pdf (accessed May 26, 2005).
Runge, C.F., and L.A. Jackson. 2000. “Labelling, Trade and Genetically Modified Organisms: A Proposed Solution.” Journal of World Trade 34(1): 111–122.
Sheldon, I. 2002. “Regulation of Biotechnology: Will We Ever ‘Freely’ Trade GMOs?” European Review of Agricultural Economics 29(1): 155–176.
Smyth, S., and P.W.B. Phillips. 2002. “Product Differentiation Alternatives: Identity Preservation, Segregation and Traceability.” AgBioForum 5(2): 30–42.
Sobolevsky, A., G. Moschini, and H. Lapan. 2005. “Genetically Modified Crops and Product Differentiation: Trade and Welfare Effects in the Soybean Complex.” American Journal of Agricultural Economics 87(3): 621–644.
Sundstrom, F.J., J. Williams, A. Van Deynze, and K.J. Bradford. 2002. “Identity Preservation of Agricultural Commodities.” Publication No. 8077, Agricultural Biotechnology in California Series, Davis, CA.
Taylor, M.R., and J.S. Tick. 2003. “Post-Market Oversight of Biotech Foods: Is the System Prepared?” Report commissioned by the Pew Initiative on Food and Biotechnology, Washington, D.C., and prepared by Resources for the Future, Washington, D.C.
Teisl, M.F., and J.A. Caswell. 2003. “Information Policy and Genetically Modified Food: Weighing the Benefits and Costs.” Working Paper No. 2003-1, Department of Resource Economics, University of Massachusetts at Amherst.
Tirole, J. 1988. The Theory of Industrial Organization. Cambridge, MA: The MIT Press.
U.S. Food and Drug Administration. 2001. “Voluntary Labeling Indicating Whether Foods Have or Have Not Been Developed Using Bioengineering.” Draft Guidance for Industry (January).
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2006 Springer Science+Business Media, LLC
About this chapter
Cite this chapter
Moschini, G., Lapan, H. (2006). Labeling Regulations and Segregation of First- and Second-Generation GM Products: Innovation Incentives and Welfare Effects. In: Just, R.E., Alston, J.M., Zilberman, D. (eds) Regulating Agricultural Biotechnology: Economics and Policy. Natural Resource Management and Policy, vol 30. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-36953-2_13
Download citation
DOI: https://doi.org/10.1007/978-0-387-36953-2_13
Publisher Name: Springer, Boston, MA
Print ISBN: 978-0-387-36952-5
Online ISBN: 978-0-387-36953-2
eBook Packages: Biomedical and Life SciencesBiomedical and Life Sciences (R0)