Progress 10/01/03 to 09/30/08
Outputs
OUTPUTS: The model of quality differentiated duopoly where firms compete in their environmental quality of their products and face a minimum quality standard (MQS) imposed by the regulator was extended to examine the social welfare effect of introducing an MQS as compare with the welfare under no regulation. The range of standard levels and market conditions under which a MSQ unambiguously increases (reduces) the average quality and/or social welfare was identified. The results were presented at two international conferences: (1)The 18th Annual Conference of the Canadian Resource and Environmental Economics (CREE) 2008, Toronto, October 3-6, 2008.(2) The 83rd Annual Conference of the Western Economic Association International, Waikiki, Hawaii, June 29-July 3, 2008. A revised version of the paper was resubmitted for peer refereed journal publication. Written testimony on the regulation of genetically modified crops was prepared for the U.S. Congress House of Representatives, Domestic Policy Subcommittee, of the Oversight and Government Reform Committee, March 13th, 2008. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: In March 2008, the PI was invited to testify at a U.S. Congressional hearing on the National Environmental Policy Act (NEPA) and the USDA's compliance with that Act regarding the regulation and release of genetically modified crops. Lawyers have described NEPA as the most important U.S. law governing biotechnology.
Impacts
It was shown that for minimum quality standards beyond an intermediate interval, as long as both firms still remain in the market, is possible that for a sub-interval, the MQS results in a lower quality than the quality consumers would enjoy without regulation, so that, combined with lower profits for firms, it reduces the overall welfare. Furthermore, even when the MQS is so high that consumers unambiguously gain from its introduction, its welfare effect can still be ambiguous because of decreased producers' profits. The analysis of the welfare effects of an MSQ makes clear that it is only under some strict conditions that a minimum quality standard would unambiguously enhance welfare; namely when (i) the standard is neither too weak nor too strict, (ii) the low-quality product dominates the market, (iii) the products are close substitutes, and (iv) the difference in firms' unit costs of quality is sufficiently small. Outside of these conditions, the welfare effect of a MQS policy is most likely ambiguous or could even be negative. These findings alert regulators to exercise caution in using MQS as a regulatory instrument. In March 2008, the PI was invited to testify at a U.S. Congressional hearing on the National Environmental Policy Act (NEPA) and the USDA's compliance with that Act regarding the regulation and release of genetically modified crops. Lawyers have described NEPA as the most important U.S. law governing biotechnology.
Publications
- Carter's U.S. Congressional testimony can be found at: http://domesticpolicy.oversight.house.gov/story.aspid=1816, 2008.
- McKee, G., R. Goodhue, F. Zalom, C. A. Carter and J. A. Chalfant "Population Dynamics and the Economics of Invasive Species Management: The Greenhouse Whitefly in California-grown Strawberries" Journal of Environmental Management Volume 90, Issue 1, January 2009, Pages 561-570).
- Gruere, G.P., C.A. Carter, and H. Farzin "What labelling policy for consumer choice The Case of Genetically Modified Food in Canada and Europe" Canadian Journal of Economics. Volume 41, Issue 4, November 2008, Pages: 1472-1497
- Gruere, G.P., C.A. Carter, and H. Farzin "Explaining International Labeling Policies of Genetically Modified Food" Review of International Economics. (forthcoming 2009).
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Progress 01/01/07 to 12/31/07
Outputs
A general model of differentiated duopoly was developed in which two firms differentiate their products with respect to consumers' perceived quality attributes such as the degree of genetic modification or organic content, safety quality, or environmental quality. It is shown that the effects of introducing a mandatory quality standard depend critically on level of the standard, the firms' cost differential, and the degree to which the products are strategic substitutes. StarLink corn is a genetically modified corn that was unapproved for human consumption in the U.S. or elsewhere. It accidentally ended up in the food chain. We analyze the market impact of contamination of the U.S. food-corn supply by StarLink corn. We find that the contamination led to a 6.8 percent discount in corn prices and that the suppression of prices lasted for at least a year. International differences in GM food labeling regulations continue to hamper international trade in GM crops. We
categorize the various international approaches to the labeling of GM food and evaluate the prospects for harmonization of labeling policies across countries.
Impacts
We have published a journal article, a book chapter and presented a paper at professional meetings. Our research shows that accidental mixing of genetically modified crops with conventional crops can be very costly. We outline the controversy over the economics of genetically modified food labeling policies. Our work has direct relevance for policy makers evaluating optimal approaches to regulating GM crops and GM foods.
Publications
- Farzin, Y. Hossein and Ken-Ichi Akao. 2006. Environmental quality in a differentiated duopoly. FEEM Working Papers,#138.06, 30 pp. Paper presented at the 2007 AAEA, WAEA, CAES Joint Annual Meeting, Portland, Oregon, July 29-August 1, 2007.
- Carter, C.A. and G. Gruere. "International Approval and Labeling Regulations of Genetically Modified Food in Major Trading Countries." Chapter in R.E. Just, J.M. Alston, and D. Zilberman (eds). Regulating Agricultural Biotechnology: Economics and Policy. New York: Springer Publishers, 2006.
- Carter, C.A. and A. Smith "The Market Effect of a Food Scare: The Case of Genetically Modified StarLink Corn." The Review of Economics and Statistics, August 2007, Vol. 89, No. 3: 522-533.
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Progress 01/01/06 to 12/31/06
Outputs
This project involves economic analysis of genetically modified crops. Work in progress involves the study of international differences in genetically modified food labeling regulations and the economics of the co-existence of genetically modified crops and conventional crops in California agriculture.
Impacts
We have published a journal article on genetically modified wheat, where we describe the controversy over this new technology that is not yet commercialized. Our research shows that the North American wheat industry lost profit opportunities because this new technology was shelved.
Publications
- Berwald, D., Colin Carter, and G. Gruere. 2006. Rejecting new technology: The case of genetically modified wheat. American Journal of Agricultural Economics, Vol. 88, no. 2, pp. 432-447.
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Progress 01/01/05 to 12/31/05
Outputs
This project involves economic analysis of genetically modified crops. Work in progress involves the study of international differences in genetically modified food labeling regulations and the economics of the co-existence of genetically modified crops and conventional crops in California agriculture.
Impacts
We have published a book on genetically modified wheat, where we describe the controversy over this new technology that is not yet commercialized. Our research shows that developing countries have a huge stake in this new technology, but European policies are holding back adoption of genetically modified wheat. We outline the similarity in the controversy between genetically modified rice and genetically modified wheat, both food crops. Our book provides economic welfare estimates of the cost of not adopting genetically modified wheat. The costs are found to be quite large and we conclude that the optimal time to adopt genetically modified wheat is now.
Publications
- Carter, C.A., D. Berwald, and A. Loyns. Economics of Genetically Modified Wheat. Toronto: University of Toronto Press. 2005.
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Progress 01/01/04 to 12/31/04
Outputs
This project involved an economic study of the potential profitability of herbicide-tolerant (HT) rice cultivation in the Sacramento Valley region of California. We estimate first-year returns to potential adoption for the average producer, and then use both deterministic and stochastic methods to perform sensitivity analysis to account for heterogeneity and uncertainty. We find that higher-cost producers are most likely to benefit from the new technology. Work in progress involves the study of international differences in genetically modified food labeling regulations and the economics of the co-existence of genetically modified crops and conventional crops in California agriculture.
Impacts
Our work on rice should potentially benefit the California rice industry and California's environment. We hope that our research will contribute to the important debate in California over genetically modified crops.
Publications
- Bond, Caig A., C.A. Carter and Y. H. Farzin, March 2004. 'Grower Benefits from the Adoption of Genetically Modified Rice in California.' ARE Update, Vol 7, no. 4, pp. 1-4.
- Gruere, Guillaume P., C.A. Carter and Y.H. Farzin, August 2004. 'Explaining International Differences in Genetically Modified Food Labeling Regulations.' Selected paper presented at American Agricultural Economics Association annual meeting, Denver CO, August 1-4, 2004. 28pp,
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Progress 01/01/03 to 12/31/03
Outputs
The Starlink incident is a well known event in biotech food, whereby an unapproved corn variety made its way into the food chain. In a paper with Smith, I evaluate the economic impact of the Starlink contamination on non-Starlink corn growers. In addition, this project is examing international approaches to the labeling of genetically modified food and tries to explain the patchwork of regulatory approaches across countries.
Impacts
The potential economic impact of genetically modified crops is larger in California than in any other state in the nation. This research will help evaluate the benefits and costs of genetically modified crops.
Publications
- Carter, C.A. and A.D. Smith. 2003. 'StarLink contamination and Impact on Corn Prices.' University of California, Davis, Department of Agricultural and Resource Economics. Contributed paper prestented at the International Conference: Agricultural Policy Reform and the WTO: Where Are We Headed? Capri (Italy) June 23-26, 2003, 33 pp.
- Carter, C.A. and G.P. Gruere. 2003. 'International Approaches to the Labeling of Genetically Modified Foods.' Choices: The Magazine of Food, Farm and Resource Issues, pp 1-4.
- G.P. Gruere, C.A. Carter and Y.H. Farzin. 2003. 'Labeling of Genetically Modified Foods: Does It Really Provide Consumer Choice?' Paper presented at the 7th ICABR International Conference on Public Goods and Public Policy for Agricultural Biotechnology, Ravello, Italy, June 29-July 3, 2003, 26 pp.
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