Governing the Co-existence of GM Crops: Ex-Ante Regulation and Ex-Post Liability under Uncertainty and Irreversibility
AbstractThe future institutional environment for the co-existence of genetically modified (GM) crops, conventional crops and organic crops in Europe combines measures of ex-ante regulation and ex-post liability rules. Against this background we ask the following two questions: How does ex-ante regulation and ex-post liability under irreversibility and uncertainty affect the adoption of GM crops? What are the implications for regional agglomeration of GM and non-GM crops? Ex-ante regulations and ex-post liabilities for using GM crops will induce additional costs. These costs are modelled in a classical way. The model is advanced by including irreversibility and uncertainty and taking into account transaction costs of negotiating possible solutions with neighbouring farmers which are assumed to be partially irreversible. The results show that the design of ex-ante regulation and ex-post liability increases the value of waiting and results in less immediate adoption of the GM technology. Additionally, the rules and regulations in the EU do provide incentives for the regional agglomeration of GM and non-GM crops that are mainly driven by the irreversibility effect of the ex-ante regulatory and ex-post liability costs.
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Bibliographic InfoPaper provided by Humboldt University Berlin, Department of Agricultural Economics in its series Institutional Change in Agriculture and Natural Resources Discussion Papers with number 18845.
Date of creation: 2006
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More information through EDIRC
co-existence; GM crops; liability law; public regulation; technology adoption; Agricultural and Food Policy; Research and Development/Tech Change/Emerging Technologies; K13; O33; Q18;
Find related papers by JEL classification:
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
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