ECONOMIC ANALYSIS ON MARKET RESPONSES TO FOOD SCARE EVENTS

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: TERMINATED
• Funding Source: HATCH
• Reporting Frequency: Annual
• Accession No.: 0224315
• Project No.: NJ02123
• Project Start Date: Dec 1, 2010
• Project End Date: Nov 30, 2015

Project Director
Jin, YA.

Recipient Organization
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
3 RUTGERS PLZA
NEW BRUNSWICK,NJ 08901-8559

Performing Department
Agricultural Food & Resource Economics

Non Technical Summary
The food supply chain that extends from farm to folk faces numerous food safety challenges, including naturally-occurring bacterial pathogen contaminations, intentional and unintentional animal disease outbreaks, and even possible terrorist attacks. Food scare events may have significant socio-economic consequences. According to the Center for Disease Control (CDC), food-borne illness sickens 76 million Americans, causes 325,000 hospitalizations and thousands of deaths, and costs $44 billion annually. In addition, market responses, including changes in food consumption, the market value of food companies, and futures prices of agricultural commodities, can generate even greater economic loss. While a market response to a scare event may start at one particular stage in the food supply chain, it can easily extend upstream and/or downstream in the food supply chain. A market response can also readily spread to economic sectors outside of the food industry. Suppose an outbreak of foot-and-mouth (FMD) disease is detected and confirmed in a cattle feedlot. Changes in meat consumption are likely as slaughter of infected and contact animals causes supply distortions; consumers may also change their preference for meat consumption. Traders in futures markets exposed to subsequent media coverage and government announcements of such outbreaks will react accordingly, causing abnormal changes of feed cattle and feed cattle futures. Meat companies will react to this event as well. Given the vertical (across different stages of a food supply chain) and horizontal (across various industries) nature of market response to food scare events, a systematic, thorough investigation of the market impacts of such events is warranted. This project will investigate market responses to food scare events over a full range, focusing on the size and duration of these responses. In particular, this project will examine asymmetric impacts between heterogeneous economic agents (e.g. firms and consumers), across different stages of a food supply chain, and between different industries, for different types of food scare events. Research results from this systematic and thorough investigation will inform policy makers in government, industry, and companies on likely market responses to these events, making them better prepared to respond to and manage these adverse events. The proposed research accords with the mission of the NJAES as it identifies current and future challenges on food safety and quantifies the subsequent economic consequences. It also provide important information to meet the national goals for agricultural in providing "a safe and secure food and fiber system" and enhancing "quality of life for Americans".

Animal Health Component

(N/A)

Research Effort Categories

Basic

(N/A)

Applied

(N/A)

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
603	3260	3010	25%
607	3310	3010	25%
610	3320	3010	25%
606	5010	3010	25%

Knowledge Area
603 - Market Economics; 607 - Consumer Economics; 610 - Domestic Policy Analysis; 606 - International Trade and Development;

Subject Of Investigation
3320 - Meat, beef cattle; 3310 - Beef cattle, live animal; 3260 - Poultry meat; 5010 - Food;

Field Of Science
3010 - Economics;

Keywords

food safety

marketing

food scare events

market responses

food supply chain

differentiated impacts

Goals / Objectives
This project will investigate market responses to food scare events over a full range, focusing on the size and duration of these responses. In particular, this project will examine asymmetric impacts between heterogeneous economic agents, across different stages of a food supply chain, and between different industries, for different types of food scare events. The overall aim of this research is to describe and analyze market responses to food scares events along the food supply chain. The specific objectives are listed below. Objective 1: To develop and extend a database combining information: (a) on food scare events and food safety efforts from multiple agencies; and (b) on market responses including consumption data, futures prices on related agricultural commodities, and futures prices of relevant food companies among others. Objective 2: To develop a comparative analysis investigating asymmetric market impacts resulting from different types of food scare events, specifically, bacteria pathogen contamination and animal disease outbreaks. Objective 3: To identify and quantify market responses in a full range for certain food scare events, including the impacts on food consumption, price margins along the supply chain, futures markets of agricultural commodities, and stock prices of relevant publically listed companies. Objective 4: To develop, specify and estimate an empirical model that characterizes profiles of heterogeneous consumers, depending on their consumption changes, and quantifies differentiated impacts on different food brands associated with a food scare event. The research will contribute to the existing literature on food safety by systematically investigating and comparing market responses (a) across different market sectors (food consumption, futures and equity markets of agricultural food products); (b) among heterogeneous consumers and firms; (c) along different stages of the food supply chain; (d) between different types of food scares; and (e) on different product brands. This research will provide important insights into the various challenges faced by the U.S. food supply chain from farm to folk, as well as quantify market response to food scare events across different market sectors and consumer segments and along different stages of food supply chain. Policy makers and industry leaders will benefit from systematic information on food safety and market responses to food scare events. Such economic analysis will help policy makers and industry leaders to better understand potential consequences of these events. They will be better prepared to respond to and manage such crises if food scare event occurs. Consumers will also benefit from this systematic analysis as well; they will be better informed about the consequences of various food scare events and become better able to adjust their consumption and investment behavior.

Project Methods
Procedure for Objective 1: Objective 1 involves obtaining, organizing and merging data from various public and private sectors for identified food scare events. I have already documented the chronology of sixteen BSE cases in North America. Data collection efforts will be extended to other animal disease outbreaks as well as product recalls. Available data on market responses includes (a) AC Nelson homescan data related to certain product recalls (eg. the 2007 peanut butter recall) that is currently on the progress under the cooperative agreement with ERS of USDA.; (b) futures prices of four meat commodities, live cattle, fed cattle, lean hogs, and pork bellies from the Chicago Mercantile Exchange (CME), which will be used for the market analysis of confirmation as well as rumors of animal disease outbreaks; and (c) stock prices of publically listed food companies collected during the course of this research. In addition to the studies focusing on the food scare events in the U.S., I have been conducting research in the context of other regions like China. In particular, I have been investigating the 2008 milk contamination incidents in China. I have collected data of the stock price of the relevant dairy companies that are publically traded in different stock markets. I am in the process of obtaining scanner data on dairy consumption in Shanghai. Procedure for Objective 2: (a) Collect monthly consumption data (price and quantity) for different types of meat (beef, pork, chicken, and turkey) and FSIS meat recalls for identified food scare events (b) Specify appropriate econometric models to estimate demand for affected food products. (c) Estimate the effect of food scare events (d) Test for differences in consumer response to animal disease-related food scares compared with bacterial pathogen related food recalls. Procedure for Objective 3: (a) Identify appropriate food scare events (b) Collect data on consumption, product prices, futures prices, and stock prices (c) Specify theoretical and econometric models that will allow us to investigate a potentially wide range of market responses in reaction to the identified food scare event (d) Estimate the impacts on meat consumption, price, price margins along the supply chain, futures prices, and stock prices of relevant companies (e) Compare the size and persistence of the impact across different market sectors Procedure for Objective 4: (a) Identify a food scare event (b) Obtaining homescan data from USDA-ERS relating to the identified food scare event (c) Compile and clean up data sets (d) Specify an econometric model that will allow us to investigate potential changes in brand choices and consumption patterns as consumer react to the identified food scare event. (e) Estimate the effect of food scares on brand choice and consumption to detect differentiate responses between brands (f) Identify demographic profiles of two consumer segments when facing food scare events - those who are more likely to switch to a high quality brand and those who are more likely to stop consuming the adversely affected product category regardless of brands

Progress 12/01/10 to 11/30/15

Outputs
Target Audience:Researchers, students and policy makers with an interest in food safety, obesity trends and food economics. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Through peer reviewed publications, student instruction and meetings. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Over the course of this project, we sought to investigate market responses to food scare events which there were two large key examples - the 2008 milk scandal in China and the 2007 peanut butter recall in the United States which provided for excellent data studies regarding the effect of these scares on policy changes as well as brand choices made by consumers. The focus of the research shifted throughout the project to more of a focus on one of the NJAES plan of work areas - childhood obesity. There were publications and presentations detailing our findings about the economics which cause barriers to healthy eating such as access to supermarkets and fresh vegetables. We also studied the intent to lose weight by adolescents versus behaviors. It showed that distorted self-image was a problem causing health-compromising weight-loss methods even in normal-weight individuals. The Youth Risk Behavior Surveillance Study provided evidence to establish a need for improved behavioral interventions against childhood obesity as well as a need for improved body weight perception to avoid the danger of extreme weight-loss methods.

Publications

• Type: Journal Articles Status: Published Year Published: 2015 Citation: M. Fan and Y.H. Jin (2015) The Effects of Weight Perception on Adolescents' Weight-Loss Intentions and Behaviors: Evidence from the Youth Risk Behavior Surveillance Survey. Int J Environ Res Public Health 12(11):14640-68. Epub 2015 Nov 17.

Progress 10/01/14 to 09/30/15

Outputs
Target Audience: Undergraduate students who took my course on food safety and health policy. I draw significant amount of research output from this project for the course. I participated in the food safety workshop organized by Renmin University of China in July, 2015. I have been serving on the following committees: (a) New Jersey Food Council: Food Safety and Quality Committee since 2011; and (b) New Jersey Produce Safety Task Force to Department of Agriculture of New Jersey since 2011. Changes/Problems:This Hatch project has been adjusted along the way. It starts with a focus on food safety and the market responses of food safety. It gradually shifts to health and food economics. In particular, Dr. Jin has made great efforts on health and food economics by investigating social, behavioral, and policy aspects ofoverweight and obesity of adults and children in the United States. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?(1) The research outcomes resulting from this Hatch project has been discussed with undergraduate students in Dr. Jin's course titled "Food Safety and Health Policy" offered in Fall, 2015 at Rutgers. (2) The research outcomes resulting from this Hatch project has been discussed with students in a one-week course offered by Dr. Jin at Renmin University of China in July, 2015 in Beijing. (3) Dr. Jin was invited to give a seminar in School of Economics and Management atTongji University, Shanghai,in July 8-9, 2015. The talk was partly based on the research outcome from this Hatch project. (4) Dr. Jin was invited to give a talk at the workshop titled "Consumer Behavior, Self-Control and Intrinsic Motivation" organized by Department of Food and Resource Economics at University of Copenhagen on December 8-9, 2014 in Coopenhagen. The talk was based on the research outcomes from this Hatch project. (5) Dr. Jin was invited to give a talk at Hefei University on November 25, 2014. The talk was partly based on the research outcome from this Hatch project. What do you plan to do during the next reporting period to accomplish the goals?Aiming to complete this Hatch project and extend the research on health economics and food economics further.

Impacts
What was accomplished under these goals? (1) One mansucript has been submitted and is currently under review.This paper investigates the most significant food scare event in recent years in China -- the 2008 milk scandal.The concern about food safety in China reached a climax in 2008 upon the exposure of contaminated dairy products containing melamine, a colorless crystalline compound, to artificially boost the protein reading. The World Health Organization referred to this event as "one of the largest [food safety events] in recent years". This objective of this study is to investigate the stock market responses to this scandal using an event study approach and examine factors contributing to the asymmetric event impacts by employing random-effects panel estimations. We find statistically significant effects of the scandal on stock prices of dairy companies traded in different stock markets and the event effects vary by stock markets (domestic vs. overseas), product test results, status of market information, and firm attributes. (2)This HTACHproject has been adjusted along the way.In additional to food safety issues, Dr. Jin has been working on food-related health issues such as overweight and obesity. The research efforts has resulted in 6 journal artilces published in 2014-2015, including two cited in the product section.

Publications

• Type: Journal Articles Status: Published Year Published: 2015 Citation: M. Fan and Y.H. Jin (2015) Supplemental Nutrition Assistance Program and Childhood Obesity in the U.S.: Evidence from the National Longitudinal Survey of Youth 1997. American Journal of Health Economics 1(4):432-460.
• Type: Journal Articles Status: Published Year Published: 2014 Citation: M. Fan and Y.H. Jin (2014). Obesity and Self-control: Food Consumption, Physical Activity and Weight-Loss Intention. Applied Economics Perspectives and Policy 36(1):125-145.
• Type: Theses/Dissertations Status: Submitted Year Published: 2015 Citation: Kaitlin DiPaola, "Supermarket Access, Consumption of Fresh Produce, and Weight Status for U.S. Adults", Defended in December, 2015.

Progress 10/01/13 to 09/30/14

Outputs
Target Audience: Dr. Jinoffered a three-week lecture on food safety and food economics (about 32 hours lessons) to upper level undergraduate studentsat Renmin Universityin Beijing, China in July, 2014. The coursefocuses on food safety and market responsesof food scare events and provides/discusses empiricalfindings from Dr. Jin'sown researchas well as other researchers. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Liguo Zhang, Professor in the Institute of the Poyang Lake Ecosystem at Jingxi Uiversity of Finance and Economics, has been working with me as a visiting scholar from May 1st, 2014 till March 4th, 2015. His research is on food safety and security related projects in China. How have the results been disseminated to communities of interest? A seminar on food safety is given at Hefei University in November, 2014. A summer 3-233k course was offered in Renmin University in Beijing, China in July 2014. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Dr. Jin supervised master student Wei Duan. The research effort has helped to achieve some objectives outlined above, including (1) establishing the database regarding the 2007 peanut butter recall (for objective 1); (2) providing analyses on the changes in brand choice and consumption related to bacteria pathogen contamination (for objectives 2-4). In addition, the summer course offered by Dr. Jin in Renmin University on food safety and food economics diseminated the research output on food safety and food economics to broad audience. The study on the 2007 peanut butter recallindicates that the recall significantly reduced the willingness to pay (WTP) for the recalled productm and that other products gained more market shares from the recall. The positive spill-over effect on unrecalled products was greater for strong brands (national brands) than for weaker brands (store brands). The recalled product regained its market share but did not reach its pre-recall level even seven months after the recall. While the recalled product regained its market, weak brands (store brands) were more likely to lose their market share compared with national brands.

Publications

• Type: Theses/Dissertations Status: Submitted Year Published: 2014 Citation: Wei Duan (2014). Effects of the 2007 Peanut Butter Recall on Consumers' Brand Choices

Progress 10/01/12 to 09/30/13

Outputs
Target Audience: Nothing Reported Changes/Problems: The Peanut Recall Project requires significant computing time. The technician has set up one PC dedicate tot the programming for this research effort. What opportunities for training and professional development has the project provided? One undergraduate student participated in this research and completed an undergraduate honors research project/thesis. How have the results been disseminated to communities of interest? Khadijah Daniels, G.H. Cook Scholoar, presented her honor thesis titled "Consumer Perception and Response to Different Food Scare Events" at the Rutgers' G.H. Cook Scholar Presentations in April 2013. What do you plan to do during the next reporting period to accomplish the goals? Send three manuscripts for the journal publication: one on China millk scandal; one on animal disease rumors, andoneon food recalls in the U.S.

Impacts
What was accomplished under these goals? (1) I supervised a G.H. Cook Scholar, Khadijah Daniels in 2013 on her honor thesis titled "Consumer Perception and Respones to Different Food Scare Events." The following tasks have completed: (a) Upon on the IRB approval, we completed a survey among a focus group consisting 9 Rutgers undergraduates on February 22, 2013; (b) surveys were conducted among Rutgers Undergraduate students in different courses in March, 2013. A total of 200 Rutgers undergraduate students completed the survey; (c) empirical analyses were completed in early April 2013. The major findings are summarized as follows: (1) Food scare events create a stigma -- consumers are less willing to pay for food products that involved in a food scare event even if the issue is resolved and the food product is safe for consumption; and (2) the stigma effect targets to the directly-affected food products -- consumers have a negative willingness to pay for products that were directly adversely affected by the food food scare events but positive willingness-to-pay for the same products that were not affected. (2) We have made signfiicant progress on the modeling the scanner data to investigate the peanut butter recalls: (a) a mixed logit model is implemented to analyze the data; (b) some preliminary results show that the recallaffected consumers's brand choices during the recall but the effect was temporary. Since the programming takes significant computing time, we are still running programs on the full sample in multiple computers.

Publications

• Type: Conference Papers and Presentations Status: Other Year Published: 2013 Citation: Khadijah Daniels. "Consumer Perception and Responses to Different Scare Events." Presented in the G.H Cook Scholars Program Presentation, April 2013.
• Type: Theses/Dissertations Status: Accepted Year Published: 2013 Citation: Khadijah Daniels (2013) Consumer Perception and Responses to Different Scare Events. G.H. Cook Scholar Honor Thesis.

Progress 10/01/11 to 09/30/12

Outputs
OUTPUTS: Activities: (1) Analyze the impact of the 2007 peanut butter recall on consumers' brand choice (2) Analyze how self-perception of body weight affects weight control efforts/behaviors including food consumption (3) Mentor/supervise both undergraduate and graduate students (4) Teach an undergraduate course on food safety and health policy in fall 2012; Co-teacher a junior/senior colloquium, problem Solving Using Food, Nutrition, and Business Information in spring 2012 (5) Craftsmanship and efforts: a. "Enhancing the Competitiveness of the Chinese Agricultural Biotech Industry in China and Globally: An Analysis of Strengths, Constraints, and Benefits of Chinese Agricultural Biotechnology." National Natural Science Foundation of China. Beijing Institute of Technology Univ.: R. Hu (PI), Zhang, Wang, and Cai; Rutgers Univ.: C. Pray and Y. Jin. RMB3, 000, 000 (US$480,000), 2012-2016. Awarded. a. "Increasing Food Security for the Homebound via Novel Farm-Retail Connections and Nutrition Education." USDA AFRI 2012. W. Hallman (Program Director), D. Palmer, N. Fitzgerald, C. Cuite, M. Elias, Y. Jin, B. Lohse, L. Nettervile, B. Schilling, and S. Snider. $5 million, 2012-2017. Rejected. Events: (1) Conference presentation (presenting author in bold) a. M. Fan and Y. Jin. "Do Neighborhood Parks and Playgrounds Make Children More fit?" Presented at the annual meeting of Agricultural and Applied Economics Association, Seattle, August 2012. (2) Invited talk and seminars a. School of Management and Economics, Beijing Institute of Technology Univ., Aug. 7, 2012. b. Department of Agricultural, Food and Resource Economics, Rutgers Univ., Mar. 3, 2012. Services: (1) Serve as Chair or Co-Chair a. G. Rich (M.Sc.'12, non-thesis option, Co-Chair with Prof. O'Nell. b. Y. Hu (M.Sc.'12). Co-Chair with Prof. Pray. c. W. Duan (M.S.) d. C. Chen (M.S.) (2) Serve as Committee Member a. Gupta (Ph.D.'12). TAMU b. J. Mu (Ph.D.'12). TAMU c. I. Grinberg (M.S.'12). a. X.L Yu (M.S.) (4) Mentoring 15+ undergraduate students in DAFRE, Rutgers Univ. (5) Selection Committee for the Best Economics Paper in Food Safety and Nutrition, Agricultural and Applied Economics Association, 2012. (6) Editorial boards of Agricultural and Resource Economics Review of the Northeastern Agricultural and Resource Economics Association. (7) Referee for 5 journal articles and 27 conference abstracts for the 2013 AAEA meeting. Products (1) MS students graduated in 2012 that Dr. Jin supervised as a major advisor (Rich and HU, MS'12) and served on the committee (Grinberg MS'12; Mu and Gupta PhD'12). Dissemination (1) Served on the Produce Safety Task Force of New Jersey and Food Safety and Quality Committee of New Jersey Food Council since 2011. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
EFFECT OF THE 2007 PEANUT BUTTER RECALL ON CONSUMERS' BRAND CHOICES Product-crisis incidents are increasingly prevalent due to the increasing complexity of products, closer scrutiny of manufacturers and tighter regulations, and higher demand of product safety by consumers (Dawar and Pillutla, 2000, Van Heerde, et al., 2007) along with significant media coverage of such incidents (Ahluwalia, et al., 2000). Among the limited literature on product-harm crisis is limited (Klein and Dawar, 2004, Van Heerde, et al., 2007), previous studies find a spillover effect that shifts consumers from the harmed product to non-harmed products in the case of food recalls (Arnade, et al., 2009, Ma, et al., 2010, Marsh, et al., 2004, Tonsor, et al., 2010, Zhao, et al., 2011), recalls of non-food products (Freedman, et al., 2009), and animal disease outbreaks (Burton and Young, 1996, Park, et al., 2008). The spillover effect is found to be more significant in the short run (Marsh, et al., 2004, Van Heerde, et al., 2007) and differ between strong and weak brands (Zhao, et al., 2011). This study contributes to the third research stream in the follows. First, we explicitly estimate the change of brand preference among consumers using scanner data while controlling for other observable band attributes and individual characteristics. Second, the data set consists both national and store brands which allows us to examine the heterogeneous effects resulting from the product-harm crisis on strong and weak brands. Third, based on the estimated brand preference and its change due to the product harm crisis, we are able to examine socio-demographic profiles of consumers who are more like to change their brand preference.

Publications

• Y.H. Jin and J. Mu (2012). AI Outbreaks in China: Willingness to Pay for Tracebility Labeling in Health and Animal Agriculture in Developing Countries. D. Zilberman, J. Otte, D. Roland-Holst, and D. Pfileffer, ed. New York: FAO and Springers Science+Business Media, LLC.

Progress 01/01/11 to 12/31/11

Outputs
OUTPUTS: Activities: (1) Analyzing the 2008 China Milk scandal data collected from surveys and compiled from secondary data sources. (2) Analyzing the AC Nielson home scan data and investigating the impact of the 2007 peanut butter recall. (3) Mentoring and supervising both undergraduate and graduate students (see the service section). (4) Teaching an undergraduate level course on food safety and health policy in fall, 2011. (5) Invited to co-teach a SEBS (School of Environmental and Biological Science) Junior/Senior Colloquium on problem solving using food, nutrition, and business information in spring 2011. (6) Submit a NIFA proposal as a project leader titled "Childhood Obesity and Neighborhood Characteristics: Causal Links and Interventions" ($1,396.037 in total) in May 2011, but failed to get the grant. Events: (1) Y.H. Jin, L.G. Lin, L. Zhao. "Do Consumers Trust the National Inspection Exemption Brands Evidence from Infant formula in China". Presented at the annual meeting of American Agricultural and Applied Economics Association, Pittsburgh, July 2011. (2) Invited talk titled "Stock market responses to the 2008 China Milk Contamination Events" in Department of Agricultural and Resource Economics at University of Connecticut, March 18, 2011. (3) Participated in the workshop on "Using Scanner Data to Answer Food Policy Questions" sponsored by ERS in June, 2011. Services: (1) Served as a thesis advisor for Gao Chen (M.Sc. 2011) and as a thesis committee member of Beinan Zhang (M.S., '11) and Suchi Zhang (M.S., '11) in Department of Agricultural, Food and Resource Economics (DAFRE), Rutgers University. (2) Serving as a major thesis advisor for four MS students (Yahong Hu, Guiliana Rich, Chen Chen, and Wei Duan) in DAFRE, Rutgers University. (3) Serving as thesis committee members for two doctoral students (Jianhong Mu, Rajorshi Sen Gupta) and one MS student (Alicia Israel) in Department of Agricultural Economics, Texas A&M University. (4) Mentoring 18 undergraduate students in DAFRE, Rutgers University. (5) Served on the Selection Committee for the Best Economics Paper in Food Safety and Nutrition, Agricultural and Applied Economics Association, 2011. (6) Served on the editorial boards of Agricultural and Resource Economics Review, the official journal of the Northeastern Agricultural and Resource Economics Association. Products (1) New applied knowledge and findings about the market responses of food safety events learned from the 2008 China milk scandal and the 2007 peanut butter recall in the U.S. (2) Learning new information and techniques of using the scanner data to analyze food policy questions through the 2011 ERS workshop in June. (3) Establish collaboration with two assistant professors at Shanghai University of Finance and Economics in China through the project on the 2008 China milk scandal. (4) MS students graduated in 2011 for whom Dr. Jin supervised as a major advisor (Gao Chen, MS '11) and Dr. Jin served on the committee (Beinan Zhang, MS '11 and Shuci Zhang MS '11). Dissemination (1) Served as a member the Produce Safety Task Force of New Jersey and Food Safety and Quality Committee of New Jersey Food Council since 2011. PARTICIPANTS: The following two master students in Department of Agricultural, Food and Resource Economics at Rutgers University provided research assistance to the project: (1) Chen Gao, who helped on the 2008 China milk scandal project; and (2) Yahong Hu, who helped on data compiling for Dr. Jin's research. Dr. Jin has been collaborating with two faculty members at Shanghai University of Finance and Economics, China (Dr. Liguo Lin and Dr. Lan Yao) on the 2008 China milk scandal project. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
Although the literature that has examined the impact of food scare events on food demand, prices, and price margins in the supply chain promotes an understanding of the impact of food scare events at the macro level, it does not offer much help in understanding outcomes at the micro level (i.e., disaggregated to the consumer and product level). Consumers may respond differently to such events, depending on their backgrounds, tastes and preferences, and other factors. It is also possible that, in a category with differentiated products, food scare events may have a differential impact on certain brands. No study thus far has systematically examined how the response to such events varies across differentiated products and heterogeneous consumers; this is a critical gap in the literature on food scare events. Dr. Jin's work on the 2007 peanut butter recall address the following unexplored issues: (a) the effect of food scare events across different brands, especially nationally known brands and store brands, and (b) profile of consumers who switch between brands (i.e. brand choice) and who stop buying into the product category (i.e. consumption pattern). Her project focusing on the micro level of individual consumers and brands will help food industry and policy makers develop and implement better crisis management plans should food scare events occur. The project on the 2008 China milk scandal has two main parts. First, we analyze the stock market responses to the scandal and examine the potential differential impacts on firms publically trade on different stock markets and received different product test results. The results strongly support heterogeneous impacts with a significant greater impact on firms traded in the foreign stock market and those are found to be contaminated; but the adverse impact is short-lived as the market quickly absorbed the information shock. Second, the 2008 scandal caused the Chinese government to stop use the National Inspection Exemption system in the food sector in China. We investigate the NIE title from perspectives of firms and consumers by answering the following two research questions: (a) Does and by how much the NIE title boost sales revenues and (b) Do consumers trust the NIE brands when the NIE titled firms are involved in a food scare event We find that the NIE title boost sale revenues and its impacts are both statistically and economically significant. Consumers still prefer the NIE brands over the non-NIE brand, even after the milk scandal in which 22 dairy companies involved held an effective NIE title. This study imposes some concerns of the annulment of the NIE system in the food sector.

Publications

• Park, M., Y.H. Jin, and H.A. Love. (2011). Dynamic and Contemporaneous Causality in a Value Chain: Evidence from the U.S. Beef Industry. Applied Economics, 43(30):4785-4801.
• Y.H. Jin, D. Zilberman, A. Heiman, and Y. Li. (2011). Variations of Willingness to Pay for Brands across Product Categories, Locations, and Consumers. Agricultural Economics, 42: 141-152.
• Y.H. Jin and J. Mu (2011). Avian Influenza Outbreaks in China: Economics Consequences and Consumer Perceptions in Human and Environmental Health and the Future of Animal Agriculture, D. Zilberman, J. Otte, D. Roland-Holst, and D. Pfileffer, ed. New York: Food and Agricultural Organization of the United Nations and Springers Science and Business Media, LLC.