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Food Safety and Spinach Demand: A Shock Correction Model

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  • Arnade, Carlos Anthony
  • Calvin, Linda
  • Kuchler, Fred

Abstract

Conventional Error Correction Models estimate the adjustment rate to all components of econometric errors. In this paper we estimate the response to a specific large error and investigate if the adjustment rate to a particular disequilibrium shock was distinct. We examine demand for leafy green vegetables, accounting for the 2006 U.S. Food and Drug Administration announcement that consumers should not eat spinach as it was a possible cause of an ongoing multi-state foodborne illness outbreak due to E-coli. If consumers initially responded to the government warning as if risks were significant but gradually realized that risk levels were negligible, the adjustment back to pre-announcement behavior could be considered a correction. Here, we develop a model of consumer behavior where consumers correct both for past errors and for any errors in their reaction to the shock. This method provides estimates of the rates of adjustment to the government announcement.

Suggested Citation

  • Arnade, Carlos Anthony & Calvin, Linda & Kuchler, Fred, 2009. "Food Safety and Spinach Demand: A Shock Correction Model," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49208, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea09:49208
    DOI: 10.22004/ag.econ.49208
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    References listed on IDEAS

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    1. Calvin, Linda, 2007. "Outbreak Linked to Spinach Forces Reassessment of Food Safety Practices," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-8, June.
    2. Kelvin Balcombe & George Rapsomanikis, 2008. "Bayesian Estimation and Selection of Nonlinear Vector Error Correction Models: The Case of the Sugar-Ethanol-Oil Nexus in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 658-668.
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    More about this item

    Keywords

    Consumer/Household Economics; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety;
    All these keywords.

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