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Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products

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  • Lapan, Harvey E.
  • Moschini, Giancarlo

Abstract

A partial-equilibrium, two-country model is developed to analyze implications from the introduction of genetically modified (GM) products. In the model, innovators hold proprietary rights, farmers are (competitive) adopters, some consumers deem GM food to be inferior in quality to traditional food, and the mere introduction of GM crops affects the costs of non-GM food (because of costly identity preservation). Among the results derived, it is shown that, although GM innovations have the potential to improve efficiency, some groups can be made worse off. Indeed, it is even possible that the costs induced by GM innovations outweigh the efficiency gains.

Suggested Citation

  • Lapan, Harvey E. & Moschini, Giancarlo, 2004. "Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products," ISU General Staff Papers 200408010700001325, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200408010700001325
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    References listed on IDEAS

    as
    1. Harvey E. Lapan & Giancarlo Moschini, 2000. "Incomplete Adoption of a Superior Innovation," Economica, London School of Economics and Political Science, vol. 67(268), pages 525-542, November.
    2. D.S. Bullock, 2001. "Who pays the costs of non-GMO segregation and identity preservation ?," Post-Print hal-02283458, HAL.
    3. Giancarlo Moschini & Harvey Lapan, 1997. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1229-1242.
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