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How do GM / non GM coexistence regulations affect markets and welfare?

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  • Desquilbet, Marion
  • Poret, Sylvaine

Abstract

This paper presents a theoretical economic model assessing the effects of the level of mandatory genetically modified (GM) / non-GM coexistence regulations on market and welfare outcomes. We assume vertical differentiation of GM and non-GM goods on the consumer side. Producers are heterogeneous in their production cost for GM crops. Producers of non- GM crops face a probability of having their harvest downgraded if gene flow from GM fields raises its content in GMOs (genetically modified organisms) above the labeling threshold. The government may impose on GMO producers mandatory ex ante isolation distances from non- GM fields in order to decrease the probability of non-GM harvest downgrading. It may also introduce an ex post compensation to non-GMO farmers for profit losses due to harvest downgrading, imposing GMO farmers’ participation to a compensation fund via a tax on GM seeds. Assuming endogenous crop choices and prices, we study the effects of ex ante regulation and ex post liability of GMO producers on market equilibrium, on the achievement of coexistence, and on both global and interest group welfare.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 12-350.

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Date of creation: Nov 2012
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Publication status: Published in European Journal of Law and Economics, vol.�37, Springer Netherlands, février 2014, p.�51-82.
Handle: RePEc:tse:wpaper:26514

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  1. Desquilbet, Marion & Bullock, David S., 2002. "Who pays the costs of non-GMO segregation and identity preservation?," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24973, European Association of Agricultural Economists.
  2. Harvey Lapan & GianCarlo Moschini, 2007. "Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 769-783.
  3. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
  4. Desquilbet, Marion & Bullock, David S., 2010. "On the proportionality of EU spatial ex ante coexistence regulations: A comment," Food Policy, Elsevier, vol. 35(1), pages 87-90, February.
  5. Demont, Matty & Dillen, Koen & Daems, Wim & Sausse, Christophe & Tollens, Eric & Mathijs, Erik, 2009. "On the proportionality of EU spatial ex ante coexistence regulations," Food Policy, Elsevier, vol. 34(6), pages 508-518, December.
  6. Beckmann, Volker & Soregaroli, Claudio & Wesseler, Justus, 2010. "Ex-ante regulation and ex-post liability under uncertainty and irreversibility: governing the coexistence of GM crops," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(9), pages 1-33.
  7. Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2004. "On the optimal use of ex ante regulation and ex post liability," Economics Letters, Elsevier, vol. 84(2), pages 231-235, August.
  8. Gray, Emily & Ancev, Tihomir & Drynan, Ross, 2011. "Coexistence of GM and non-GM crops with endogenously determined separation," Ecological Economics, Elsevier, vol. 70(12), pages 2486-2493.
  9. Maria Lusser & Terri Raney & Pascal Tillie & Koen Dillen & Emilio Rodríguez Cerezo, 2013. "International workshop on socio-economic impacts of genetically modified crops co-organised by JRC-IPTS and FAO," JRC-IPTS Working Papers JRC69363, Institute for Prospective and Technological Studies, Joint Research Centre.
  10. Michele Graziano Ceddia & Mark Bartlett & Caterina De Lucia & Charles Perrings, 2011. "On the regulation of spatial externalities: coexistence between GM and conventional crops in the EU and the ‘newcomer principle’," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), pages 126-143, 01.
  11. Groeneveld, Rolf A. & Wesseler, Justus & Berentsen, Paul B.M., 2011. "Dominos in the dairy: An analysis of transgenic maize in Dutch dairy farming," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114595, European Association of Agricultural Economists.
  12. 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.
  13. Moschini, GianCarlo & Bulut, Harun & Cembalo, Luigi, 2005. "On the Segregation of Genetically Modified, Conventional, and Organic Products in European Agriculture: A Multi-Market Equilibrium Analysis," Staff General Research Papers 12450, Iowa State University, Department of Economics.
  14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  15. Volker Beckmann & Claudio Soregaroli & Justus Wesseler, 2006. "Coexistence Rules and Regulations in the European Union," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(5), pages 1193-1199.
  16. 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.
  17. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
  18. Demont, Matty & Daems, Wim & Dillen, Koen & Mathijs, Erik & Sausse, Christophe & Tollens, Eric, 2008. "Regulating coexistence in Europe: Beware of the domino-effect!," Ecological Economics, Elsevier, vol. 64(4), pages 683-689, February.
  19. Burrows, Paul, 1999. "Combining regulation and legal liability for the control of external costs," International Review of Law and Economics, Elsevier, vol. 19(2), pages 227-244, June.
  20. Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, vol. 20(3), pages 371-382, September.
  21. Munro, Alistair, 2008. "The spatial impact of genetically modified crops," Ecological Economics, Elsevier, vol. 67(4), pages 658-666, November.
  22. 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.
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Cited by:
  1. 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.

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