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Should The United States Initiate A Mandatory Labeling Policy For Genetically Modified Foods?

Listed author(s):
  • Huffman, Wallace E.
  • Rousu, Matthew C.
  • Shogren, Jason F.
  • Tegene, Abebayehu

In many countries, including those in the European Union, Japan, Australia, and China, labeling is required for foods that contain genetically modified material. Other countries, including the United States, do not require mandatory labeling of GM foods. The United States, however, does allow firms to voluntarily label their products as non-GM. This raises the question of whether a mandatory labeling or voluntary labeling policy is more efficient. Proponents of voluntary labeling policies say they are less expensive, because only the firms that wish to label their products must incur the labeling costs. In a mandatory labeling regime, all firms would need to incur additional costs, whether the costs are due to product testing, label design, segregation, mistakes in labeling, etc. Many proponents of mandatory labeling of GM foods say that consumers have a "right to know" what they are eating and proponents claim that governments should mandate labels for foods made through genetic modification. This paper presents empirical evidence on consumers' value for foods with positive (i.e. this food is made with genetic engineering) labels versus and for foods with negative (i.e. this food is made without genetic engineering) labels. The positive label is likely to occur under a mandatory labeling system, while the negative label is likely to occur in a voluntary system. Thus, we present evidence on the consumer value of different labeling policies. We estimate values using a laboratory auction experiment performed on 142 randomly chosen adult consumers in the Des Moines, IA, and Saint Paul, MN, areas, grouped in 8 experimental units. They participated in a random nth-price auction experiment, in which they bid on three familiar neutral food items (an oil, a processed food, and a fresh food) that may be genetically modified. Experimental units are randomly assigned to the labeling treatment (i.e., food items with accurate GM food labels versus no food labels). Using statistical design and econometric analysis, this paper will estimate the average value of food label regimes to consumers. This will be measured as the difference in the auction price of a particular food item with and without a GM food label. We present evidence that shows that a voluntary labeling system elicits the same consumer reaction as a mandatory labeling system. Because a voluntary labeling policy would be less expensive to implement, this paper provides evidence that the United States should not abandon the current voluntary labeling system for a mandatory one. This information could be useful to U.S. public policy makers who must decide on GM food labeling legislation.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2002 Annual meeting, July 28-31, Long Beach, CA with number 19857.

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Date of creation: 2002
Handle: RePEc:ags:aaea02:19857
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  1. Elizabeth Hoffman & Dale J. Menkhaus & Dipankar Chakravarti & Ray A. Field & Glen D. Whipple, 1993. "Using Laboratory Experimental Auctions in Marketing Research: A Case Study of New Packaging for Fresh Beef," Marketing Science, INFORMS, vol. 12(3), pages 318-338.
  2. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-270, March.
  3. John M. Crespi & St)phan Marette, 2001. "How Should Food Safety Certification be Financed?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 852-861.
  4. Shogren, Jason F. & Margolis, Michael & Koo, Cannon & List, John A., 2001. "A random nth-price auction," Journal of Economic Behavior & Organization, Elsevier, vol. 46(4), pages 409-421, December.
  5. Golan, Elise H. & Kuchler, Fred & Mitchell, Lorraine, 2000. "Economics Of Food Labeling," Agricultural Economics Reports 34069, United States Department of Agriculture, Economic Research Service.
  6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
  7. 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.
  8. John A. Fox & Jason F. Shogren & Dermot J. Hayes & James B. Kliebenstein, 1998. "CVM-X: Calibrating Contingent Values with Experimental Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 455-465.
  9. Jayson L. Lusk & Jutta Roosen & John A. Fox, 2003. "Demand for Beef from Cattle Administered Growth Hormones or Fed Genetically Modified Corn: A Comparison of Consumers in France, Germany, the United Kingdom, and the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 16-29.
  10. Kirchhoff, Stefanie & Zago, Angelo M., 2001. "A Simple Model Of Voluntary Vs Mandatory Labelling Of Gmos," 2001 Annual meeting, August 5-8, Chicago, IL 20540, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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