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Mandatory Food Recalls

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  • Thomsen, Michael R.
  • Ollinger, Michael
  • Crandall, Philip G.
  • O'Bryan, Corliss

Abstract

Food recalls are important for two reasons. One is that they mitigate harm when product failures occur. Another is that they augment incentives to invest in safety. When recalls are justified for their mitigation value, it makes sense that regulatory bodies be granted more control of the recall process in order to improve the manner in which recalls are conducted. Such is the stated intent of most proposals for changing the food recall system. However, we show that recalls can be justified by their incentive effect alone. In fact, recalls can be beneficial even when the social value of the harm they mitigate is so small as to be less than the costs of carrying them out. In these cases, it is important that proposals designed to improve the recall process avoid unintended side effects. First, proposals should avoid redirecting regulatory resources towards recall oversight and away from other, more pressing, food safety priorities. Second, it is important to avoid creating an environment in which agencies face a greater need to justify their recall requests. When the mitigation value of recalls is small, this may inadvertently prevent the initiation of recalls that could otherwise play a positive role in aligning incentives for safety.

Suggested Citation

  • Thomsen, Michael R. & Ollinger, Michael & Crandall, Philip G. & O'Bryan, Corliss, 2008. "Mandatory Food Recalls," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6083, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea08:6083
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    File URL: http://purl.umn.edu/6083
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    References listed on IDEAS

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    1. Hooker, Neal H. & Teratanavat, Ratapol P. & Salin, Victoria, 2005. "Crisis management effectiveness indicators for US meat and poultry recalls," Food Policy, Elsevier, vol. 30(1), pages 63-80, February.
    2. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-536, June.
    3. Michael R. Thomsen & Rimma Shiptsova & Sandra J. Hamm, 2006. "Sales Responses to Recalls for Listeria monocytogenes: Evidence from Branded Ready-to-Eat Meats," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(4), pages 482-493.
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    5. 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.
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    7. Stephen W. Pruitt & David R. Peterson, 1986. "Security Price Reactions Around Product Recall Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 9(2), pages 113-122, June.
    8. Michael R. Thomsen & Andrew M. McKenzie, 2001. "Market Incentives for Safe Foods: An Examination of Shareholder Losses from Meat and Poultry Recalls," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 526-538.
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    Keywords

    Food Consumption/Nutrition/Food Safety;

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