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Welfare Effects of the U.S Food Safety Modernization Act Produce Safety Rule


  • Ferrier, Peyton
  • Zhen, Chen
  • Bovay, John


The Produce Rules of the Food Safety Modernization Act (FSMA) marked the first instance of the FDA directly regulating food safety activities at the farm-level. Since most fruits and vegetables were covered, the law’s comprehensive ‘across-the-board’ implementation potentially created offsetting cross-price effects on the demand side since most producers would be bearing the implementation costs simultaneously. However, the fixed costs nature of some other regulations costs, the different distribution of farm sizes across commodities and the potential for some commodities to be exempted suggest that the effects would vary across commodities. We present an Equilibrium Displacement Model (EDM) to consider the effect of FSMA costs on prices and consumer and producer welfare. To parameterize the model, we use National Agricultural Statistics Service (NASS) and Food and Drug Administration (FDA) data to calculate the cost of implementing FSMA rules for 18 fruits and 21 vegetables, IRI storescan data to estimate demand elasticities, Agricultural Marketing Service data to calculate data wholesale costs shares, and supply elasticities from extant sources While varying across commodities, the average cost of implementing FSMA is 2.79 percent of farm revenue for fruits and 1.52 percent of farm revenue for vegetables, that farm prices increase by 1.68 percent (fruit) and 0.44 percent (vegetables), and that consumer prices increase by 0.70 percent (fruit) and 0.12 percent (vegetables). If there is no corresponding demand effect or cost saving at the farm level associated with the implementation of these regulations, farm welfare, as a percentage of revenue, falls by 1.11 percent (fruit) and 0.96 percent (vegetables). Also, we found that weak substitution patterns between commodities at the retail level caused off-setting cross-price effects to be weak.

Suggested Citation

  • Ferrier, Peyton & Zhen, Chen & Bovay, John, 2016. "Welfare Effects of the U.S Food Safety Modernization Act Produce Safety Rule," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235425, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea16:235425
    DOI: 10.22004/ag.econ.235425

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    Cited by:

    1. Yuzhakov, Vladimir (Южаков, Владимир) & Zyrianov, S. (Зырянов, С.), 2015. "Review and Analysis of Legal Regulation of Pre-Trial Mechanisms of Appeal Against Decisions and Actions (Or Inaction) of the Authorities and Their Officials in the Control (Supervision)
      [Обзор И Ан
      ," Published Papers mn67, Russian Presidential Academy of National Economy and Public Administration.

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    Agricultural and Food Policy; Consumer/Household Economics; Food Consumption/Nutrition/Food Safety;

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