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On the Segregation of Genetically Modified, Conventional, and Organic Products in European Agriculture: A Multi-market Equilibrium Analysis

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Abstract

Evaluating the possible benefits of the introduction of genetically modified (GM) crops must address the issue of consumer resistance as well as the complex regulation that has ensued. In the European Union (EU) this regulation envisions the "co-existence" of GM food with conventional and quality-enhanced products, mandates the labelling and traceability of GM products, and allows only a stringent adventitious presence of GM content in other products. All these elements are brought together within a partial equilibrium model of the EU agricultural food sector. The model comprises conventional, GM and organic food. Demand is modelled in a novel fashion, whereby organic and conventional products are treated as horizontally differentiated but GM products are vertically differentiated (weakly inferior) relative to conventional ones. Supply accounts explicitly for the land constraint at the sector level and for the need for additional resources to produce organic food. Model calibration and simulation allow insights into the qualitative and quantitative effects of the large-scale introduction of GM products in the EU market. We find that the introduction of GM food reduces overall EU welfare, mostly because of the associated need for costly segregation of non-GM products, but the producers of quality-enhanced products actually benefit.

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Bibliographic Info

Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 05-wp411.

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Date of creation: Oct 2005
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Handle: RePEc:ias:cpaper:05-wp411

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Keywords: biotechnology; differentiated demand; genetically modified crops; identity preservation; innovation; welfare.;

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References

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  1. Giannakas, Konstantinos & Yiannaka, Amalia, 2003. "Agricultural Biotechnology And Organic Agriculture: National Organic Standards, Labeling And Second-Generation Of Gm Products," 2003 Annual meeting, July 27-30, Montreal, Canada 22063, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Harvey E. Lapan & GianCarlo Moschini, 2002. "Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products," Center for Agricultural and Rural Development (CARD) Publications 02-wp302, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. Noussair, Charles & Robin, Stephane & Ruffieux, Bernard, 2002. "Do consumers not care about biotech foods or do they just not read the labels?," Economics Letters, Elsevier, vol. 75(1), pages 47-53, March.
  4. GianCarlo Moschini & Harvey E. Lapan, 2005. "Labeling Regulations and Segregation of First- and Second-Generation Genetically Modified Products: Innovation Incentives and Welfare Effects," Center for Agricultural and Rural Development (CARD) Publications 05-wp391, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Eric Tollens, 2004. "Biodiversity versus transgenic sugar beet: the one euro question," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 1-18, March.
  6. Moschini, GianCarlo & Lapan, Harvey E., 1999. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," Staff General Research Papers 1735, Iowa State University, Department of Economics.
  7. Charles Noussair & StÈphane Robin & Bernard Ruffieux, 2004. "Do Consumers Really Refuse To Buy Genetically Modified Food?," Economic Journal, Royal Economic Society, vol. 114(492), pages 102-120, 01.
  8. José Benjamin Falck-Zepeda & Greg Traxler & Robert G. Nelson, 2000. "Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 360-369.
  9. Bullock, D. S. & Desquilbet, M., 2002. "The economics of non-GMO segregation and identity preservation," Food Policy, Elsevier, vol. 27(1), pages 81-99, February.
  10. Murray Fulton & Konstantinos 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, Agricultural and Applied Economics Association, vol. 86(1), pages 42-60.
  11. Moschini, GianCarlo, 1998. "Semiflexible Almost Ideal Demand System, The," Staff General Research Papers 1193, Iowa State University, Department of Economics.
  12. Moschini, Giancarlo, 1998. "The semiflexible almost ideal demand system," European Economic Review, Elsevier, vol. 42(2), pages 349-364, February.
  13. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  14. Ian M. Sheldon, 2002. "Regulation of biotechnology: will we ever 'freely' trade GMOs?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(1), pages 155-176, March.
  15. Golan, Elise H. & Kuchler, Fred & Mitchell, Lorraine, 2000. "Economics Of Food Labeling," Agricultural Economics Reports 34069, United States Department of Agriculture, Economic Research Service.
  16. Giancarlo Moschini & Harvey Lapan & Andrei Sobolevsky, 2000. "Roundup ready� soybeans and welfare effects in the soybean complex," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 33-55.
  17. Andrei Sobolevsky & GianCarlo Moschini & Harvey Lapan, 2005. "Genetically Modified Crops and Product Differentiation: Trade and Welfare Effects in the Soybean Complex," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 621-644.
  18. A. Gracia & J. M. Gil & A. M. Angulo, 1998. "Spanish food demand: a dynamic approach," Applied Economics, Taylor & Francis Journals, vol. 30(10), pages 1399-1405.
  19. Matin Qaim & Greg Traxler, 2005. "Roundup Ready soybeans in Argentina: farm level and aggregate welfare effects," Agricultural Economics, International Association of Agricultural Economists, vol. 32(1), pages 73-86, 01.
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Citations

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Cited by:
  1. Anne-Célia Disdier & Lionel Fontagné, 2010. "Trade impact of European measures on GMOs condemned by the WTO panel," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(3), pages 495-514, September.
  2. GianCarlo Moschini, 2014. "In Medio Stat Virtus: Coexistence Policies for GM and non-GM Production in Spatial Equilibrium," Center for Agricultural and Rural Development (CARD) Publications 14-wp548, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. Demont, Matty & Daems, W. & Dillen, Koen & Mathijs, Erik & Sausse, C. & Tollens, Eric, 2008. "Are EU spatial ex ante coexistence regulations proportional?," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44191, European Association of Agricultural Economists.
  4. GianCarlo Moschini, 2008. "Biotechnology and the Development of Food Markets: Retrospect and Prospects," Center for Agricultural and Rural Development (CARD) Publications 08-wp477, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Desquilbet, Marion & Poret, Sylvaine, 2011. "How do GM / non GM coexistence regulations affect markets and welfare?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114757, European Association of Agricultural Economists.
  6. Ceddia, M. Graziano & Bartlett, M. & Perrings, Charles, 2008. "Policies for the regulation of coexistence between GM and conventional crops," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44193, European Association of Agricultural Economists.
  7. Zhao, Li & Gu, Haiying & Yue, Chengyan & Ahlstrom, David, 2013. "Consumer welfare and GM food labeling: A simulation using an adjusted Kumaraswamy distribution," Food Policy, Elsevier, vol. 42(C), pages 58-70.
  8. Dillen, Koen & Demont, Matty & Tollens, Eric, 2008. "Modelling heterogeneity to estimate the ex ante value of biotechnology innovations," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43945, European Association of Agricultural Economists.
  9. GianCarlo Moschini, 2006. "Pharmaceutical and Industrial Traits in Genetically Modified Crops: Co-existence with Conventional Agriculture," Center for Agricultural and Rural Development (CARD) Publications 06-wp429, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  10. Crowe, Bronwyn & Pluske, Johanna M., 2006. "Is it Cost Effective to Segregate Canola in WA?," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 14.
  11. William W. Wilson & Xavier Henry & Bruce L. Dahl, 2008. "Costs and risks of conforming to EU traceability requirements: the case of hard red spring wheat," Agribusiness, John Wiley & Sons, Ltd., vol. 24(1), pages 85-101.

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