International diffusion of gains from biotechnology and the European Union's Common Agricultural Policy
This paper analyses the impact of adopting or rejecting genetically modified GM crops in the EU, taking into account the European Union's Common Agricultural Policy (CAP). In this paper the productivity impact of GMs differs across crops, as it takes factor biased technology change into account. The transfer of knowledge across countries is modelled as a process of endogenous knowledge spillovers. Analyses with a multi-region applied general equilibrium model shows that the CAP protects farm income and production from not adopting GM crops in the EU but has costs in terms of welfare. The EU will forgo substantial benefits if it banned GM imports.
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