Implementing COOL: Comparative welfare effects of different labeling schemes
Country-of-origin labeling (COOL) is being implemented in different forms and degrees in the United States and other countries across the world. The first implementation of mandatory country of origin labeling (MCOOL) in the United States was for seafood in 2005. This is an example of partial MCOOL because it exempts the foodservice sector and excludes processed seafood from labeling. Using a conceptual framework, we analyze the welfare impacts of partial MCOOL when compared to no, voluntary, and total mandatory COOL, taking into account imperfect competition in the downstream markets, information asymmetry, and diversion of low-quality product to the unlabeled market. The model is general enough to apply to any incomplete regulation for which the perceived low-quality product is required to be labeled, such as the labeling of genetically modified food in the European Union. Our results show that when consumers have a strong enough preference for domestic relative to imported product, regulators can overestimate the gain in consumer welfare from partial mandatory labeling if they ignore the diversion of lower quality imports to the unlabeled sector. We show that if the preference for domestic product is large enough, total MCOOL benefits the home market the most overall, including domestic consumers and producers, but not the imperfectly competitive downstream agents. However, if total MCOOL is too costly to implement, partial MCOOL is the second-best solution, but only if consumers falsely believe the unlabeled product to be of higher quality than it truly is. Our results suggest more research is needed to determine the extent to which consumers value the information provided by MCOOL and to enable regulators to consider the welfare impact of diversion in evaluating incomplete mandatory labeling regulations.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Plastina, Alejandro S. & Giannakas, Konstantinos & Pick, Daniel H., 2008.
"Market and Welfare Effects of Mandatory Country-of-Origin Labeling in the US Specialty Crops Sector,"
2008 Annual Meeting, July 27-29, 2008, Orlando, Florida
6536, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Plastina, Alejandro S. & Giannakas, Konstantinos, 2007. "Market And Welfare Effects Of Mandatory Country-Of-Origin Labeling In The Us Specialty Crops Sector," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9735, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Umberger, Wendy J. & Feuz, Dillon M. & Calkins, Chris R. & Sitz, Bethany M., 2003. "Country-Of-Origin Labeling Of Beef Products: U.S. Consumers' Perceptions," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), pages -, November.
- Saak, Alexander E., 2011.
"A Model of Labeling with Horizontal Differentiation and Cost Variability,"
2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania
103540, Agricultural and Applied Economics Association.
- Alexander E. Saak, 2011. "A Model of Labeling with Horizontal Differentiation and Cost Variability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 1131-1150.
- Saak, Alexander, 2011. "A model of labeling with horizontal differentiation and cost variability:," IFPRI discussion papers 1075, International Food Policy Research Institute (IFPRI).
- Fred Kuchler & Barry Krissoff & David Harvey, 2010. "Do Consumers Respond to Country-of-Origin Labelling?," Journal of Consumer Policy, Springer, vol. 33(4), pages 323-337, December.
- Zago, Angelo M. & Pick, Daniel H., 2004. "Labeling Policies in Food Markets: Private Incentives, Public Intervention, and Welfare Effects," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(01), April.
- 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.
- Meredith L. Fowlie, 2009. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 72-112, August.
- Bureau, Jean-Christophe & Marette, Stephan & Schiavina, Alessandra, 1998. "Non-tariff Trade Barriers and Consumers' Information: The Case of the EU-US Trade Dispute over Beef," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(4), pages 437-462.
- Jayson L. Lusk & Stephan Marette, 2012.
"Can labeling and information policies harm consumers?,"
- Lusk Jayson L. & Marette Stéphan, 2012. "Can Labeling and Information Policies Harm Consumers?," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 10(1), pages 1-15, October.
- Lusk, Jayson L. & Anderson, John D., 2004. "Effects of Country-of-Origin Labeling on Meat Producers and Consumers," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August.
- Awada, Lana & Yiannaka, Amalia, 2012. "Consumer perceptions and the effects of country of origin labeling on purchasing decisions and welfare," Food Policy, Elsevier, vol. 37(1), pages 21-30.
- Mennecke, Brian & Townsend, Anthony & Hayes, Dermot J. & Lonergan, Steven, 2006. "A Study of the Factors That Influence Consumer Attitudes Toward Beef Products Using the Conjoint Market Analysis Tool," Staff General Research Papers Archive 12650, Iowa State University, Department of Economics.
- Ward, Ruby A. & Bailey, DeeVon & Jensen, Robert T., 2005.
"An American BSE Crisis: Has it affected the Value of Traceability and Country-of-Origin Certifications for US and Canadian Beef?,"
International Food and Agribusiness Management Review,
International Food and Agribusiness Management Association (IFAMA), vol. 8(02).
- Ward, Ruby A. & Bailey, DeeVon & Jensen, Robert, 2005. "An American BSE Crisis: Has it Affected the Value of Traceability and Country-of-Origin Certifications for US and Canadian Beef?," 2005 Annual Meeting, February 5-9, 2005, Little Rock, Arkansas 35515, Southern Agricultural Economics Association.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Loureiro, Maria L. & Umberger, Wendy J., 2007. "A choice experiment model for beef: What US consumer responses tell us about relative preferences for food safety, country-of-origin labeling and traceability," Food Policy, Elsevier, vol. 32(4), pages 496-514, August.
- Jayson L. Lusk & Jason Brown & Tyler Mark & Idlir Proseku & Rachel Thompson & Jody Welsh, 2006. "Consumer Behavior, Public Policy, and Country-of-Origin Labeling," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(2), pages 284-292.
- Giannakas, Konstantinos & Fulton, Murray, 2002. "Consumption effects of genetic modification: what if consumers are right?," Agricultural Economics, Blackwell, vol. 27(2), pages 97-109, August.
- Jones, Keithly G. & Somwaru, Agapi & Whitaker, James B., 2009. "Country of Origin Labeling: Evaluating the Impacts on U.S. and World Markets," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 38(3), December.
- Giannakas, Konstantinos & Fulton, Murray, 2002. "Consumption effects of genetic modification: what if consumers are right?," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 27(2), pages -, August.
- Chung, Chanjin & Zhang, Tong & Peel, Derrell S., 2009. "Effects of Country of Origin Labeling in the U.S. Meat Industry with Imperfectly Competitive Processors," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 38(3), December.
- Allshouse, Jane E. & Buzby, Jean C. & Harvey, David J. & Zorn, David, 2004. "Seafood Safety and Trade," Agricultural Information Bulletins 33779, United States Department of Agriculture, Economic Research Service.
- James Rude & Javed Iqbal & Derek Brewin, 2006. "This Little Piggy Went to Market with a Passport: The Impacts of U.S. Country of Origin Labeling on the Canadian Pork Sector," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(3), pages 401-420, 09.
- Johnecheck, Wendy A. & Wilde, Parke E. & Caswell, Julie A., 2010. "Market and Welfare Impacts of COOL on the U.S.-Mexican Tomato Trade," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(3), December.
When requesting a correction, please mention this item's handle: RePEc:eee:jfpoli:v:44:y:2014:i:c:p:14-25. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.