Changes in U.S. consumer response to food safety recalls in the shadow of a BSE scare

In December 2003, Bovine Spongiform Encephalopathy (BSE) was discovered in the United States. This food safety event received extensive media coverage and prompted changes in regulatory controls. Using a panel selection model, we show that prior to December 2003, ground beef recalls had no impact on household purchases of ground beef, even for households that were located in the recall-defined geographic areas. However, we find robust evidence that the 2003 BSE event caused a change in the way people view and respond to recalls of ground beef, a change that persisted for at least two years following the BSE event. The average impact of a ground beef recall in the post-BSE period is a 0.26lb per person reduction in retail purchases of ground beef. A decline in purchases of this magnitude would result in over $97million in losses to the beef industry in a two week period following a nationwide recall. This dwarfs the economic impacts of directly removing recalled beef from supply chains and provides FSIS increased regulatory power due to higher overall industry costs associated with food safety violations.