Elise H. Golan

Economics of Food Labeling

Federal intervention in food labeling is often proposed with the aim of achieving a social goal such as improving human health and safety, mitigating environmental hazards, averting international trade disputes, or supporting domestic agricultural and food manufacturing industries. Economic theory suggests, however, that mandatory food-labeling requirements are best suited to alleviating problems of asymmetric information and are rarely effective in redressing environmental or other spillovers associated with food production and consumption. Theory also suggests that the appropriate role for government in labeling depends on the type of information involved and the level and distribution of the costs and benefits of providing that information. This report traces the economic theory behind food labeling and presents three case studies in which the government has intervened in labeling and two examples in which government intervention has been proposed.

A Distributional Analysis of the Costs of Foodborne Illness: Who Ultimately Pays?

This paper traces the economic impact of the costs of foodborne illness on the U.S. economy using a Social Accounting Matrix (SAM) framework. Previous estimates of the costs of seven foodborne pathogens are disaggregated by type, and distributed across the population using data from the National Health Interview Survey. Initial income losses resulting from premature death cause a decrease in economic activity. Medical costs, in contrast, result in economic growth, though this growth does not outweigh the total costs of premature death. A SAM accounting of how the costs of illness are diffused through the economy provides useful information for policy makers.

Labeling Biotech Foods

Whether biotech agricultural products should be labeled has become an issue of contention both within the United States and between the United States and its trading partners.1 Economists tend to argue that labeling and product differentiation of biotech and nonbiotech commodities and food products would expand consumer welfare. Such labeling would increase consumer choice and allow consumers to participate in determining the mix of biotech and nonbiotech products that are produced.

Chapter 11 The Effect of GM Labeling Regime on Market Outcomes

Purpose – This chapter investigates the role that mandatory genetically modified (GM) labeling versus voluntary labeling has played in the split between those countries with small GM markets and those with large GM markets. Methodology/approach – Data on product introductions and other market evidence are used to examine market outcomes and identify the likely drivers of GM market bifurcation. Findings – Labeling has negligible effects on consumer choice or on GM differentiation costs and therefore does not explain the split in GM market outcomes. Other factors have driven market outcomes: namely, consumer confidence in government and the safety of the food supply, competition among manufacturers and retailers, market momentum, and most importantly, the affordability of a non-GM strategy. Ultimately, a nonGM market strategy is feasible only if consumers are willing to cover the additional costs associated with non-GM production and marketing. The two elements composing the cost/price wedge between GM and non-GM products – the cost-reducing benefits of the GM technology and the costs of differentiating non-GM products – therefore play an important role in market outcomes. In the mid-1990s, when producers, manufacturers, and retailers were determining their strategies, neither element was very large. As a result, both GM and non-GM marketing strategies were economically feasible. Practical implication – Regardless of the labeling regime, changes in the cost/price wedge between GM and non-GM products could change the mix of GM and non-GM products on the market.