Economic Effects of the Consumer-oriented Genetically Modified Products in Markets with a Labelling Regime

Authors

  • Rim Lassoued,

  • Konstantinos Giannakas

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    • Rim Lassoued is a PhD student in the Department of Bioresource Policy, Business and Economics, University of Saskatchewan, 51 Campus Drive, Saskatoon, Canada S7N 5A8. E-mail: ril089@mail.usask.ca. Konstantinos Giannakas is Professor and Co-Director, Center for Agricultural & Food Industrial Organization, Department of Agricultural Economics, University of Nebraska-Lincoln, 217 H.C. Filley Hall, Lincoln, NE 68583-0922, USA. E-mail: kgiannakas@unl.edu for correspondence. This article is based on Lassoued’s MSc thesis in the Department of Economic and Management Sciences, Mediterranean Agronomic Institute of Chania, Greece, advised by Giannakas. The authors wish to thank the Editor-in-Chief and two anonymous reviewers for helpful comments on previous versions of the paper.


Abstract

This paper builds on the literature on the economic effects of the second-generation, consumer-oriented genetically modified products (GMPs). It analyses the market and welfare impacts of the introduction of these new products in markets, like the EU, that mandate the segregation and labelling of the first-generation, producer-oriented GMPs. Developing an empirically relevant model of heterogeneous consumers and producers, the study determines the effects of the consumer-oriented GMPs on the markets of conventional, GM and organic products, and the welfare of consumers and agricultural producers. Analytical results indicate that the market effects of the new GMPs are case specific and depend on: (i) the consumer valuation of the quality-enhancing attribute of the new GMP; (ii) the level of consumer aversion to GMOs; (iii) the strength of consumer preference for organic products; and (iv) the production costs and marketing margins in the different supply channels. The policy on the labelling of the first-generation GMPs does not affect the impacts of the second-generation GMPs on the quantities and market shares of the different products. However, it does affect their price effects and welfare implications. The introduction of consumer-oriented GMPs under a mandatory labelling regime can result in losses for some GM consumers and all producers of the conventional product.

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