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Health Claims Regulation and Welfare

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  • Huang, Rui
  • Bonanno, Alessandro

Abstract

Regulation (EC) No 1924/2006, 20 December 2006, requires functional foods manufacturers operating in Europe to provide evidence that the health claims reported on the packaging are truthful. However, most applications reviewed by the European Food Safety Authority (EFSA) have been rejected, leaving food manufacturers with the option of either selling products deprived of their claims or discontinuing their production. This paper analyzes changes in welfare (both producers’ and consumers’) that would occur if the implementation of Reg. (EC) No 1924/2006 resulted in a large-scale health-claim de-labeling of functional food products. To that end, we use one year (2007) of monthly scanner data of sales of conventional and functional yogurt in the Italian market and a discrete-choice random coefficient logit demand model which accounts for consumers’ heterogeneity using the MPEC algorithm developed by Dube et al. (2009) to improve numerical efficiency and accuracy, to assess the issue. Preliminary results show that both producers and consumers can be severely impacted if reporting health-claims on functional products is not allowed; as our results indicate that consumers’ welfare losses are twice as large than producers’ a loosening of EFSA’s requirements might be required to avoid such losses.

Suggested Citation

  • Huang, Rui & Bonanno, Alessandro, 2011. "Health Claims Regulation and Welfare," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103809, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea11:103809
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    File URL: http://purl.umn.edu/103809
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    References listed on IDEAS

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    1. Marina Giacomo, 2008. "GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands," Empirical Economics, Springer, vol. 34(3), pages 537-565, June.
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    More about this item

    Keywords

    Health claims regulation; EFSA; welfare; random coefficients; MPEC.; Agricultural and Food Policy; Demand and Price Analysis; Industrial Organization; Marketing; Q18; L66; M38;

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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