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Effects of Country of Origin Labeling in the U.S. Meat Industry with Imperfectly Competitive Processors

Published online by Cambridge University Press:  15 September 2016

Chanjin Chung ,
Tong Zhang  and
Derrell S. Peel
Chanjin Chung
Affiliation:
Department of Agricultural Economics at Oklahoma State University in Stillwater, Oklahoma
Tong Zhang
Affiliation:
Research Institute of Economics and Management at Southwestern University of Finance and Economics in Chengdu, China
Derrell S. Peel
Affiliation:
Department of Agricultural Economics at Oklahoma State University in Stillwater, Oklahoma
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Abstract

The study examines the impacts of implementing mandatory country of origin labeling (COOL) on producer and consumer welfare in the U.S. meat industry. The equilibrium displacement model developed in this study includes twenty-nine equations representing retail-, processing-, and farm-level equilibrium conditions for the beef, pork, and chicken industries. Unlike previous studies, the model allows trade between domestic- and foreign-origin products and considers the imperfectly competitive market structure of meat processers. Empirical results show that without a significant increase in domestic meat demand, producers are not expected to benefit from the mandatory COOL implementation. Results of a sensitivity analysis indicate that consumers tend to bear more COOL costs than producers, as the own-price elasticity becomes more inelastic, and that producers’ benefits increase as the elasticity of domestic demand becomes more elastic with respect to the price of imported products. The existence of market power in upstream and downstream markets of processors negatively affects both consumer and producer surplus. One implication of our findings is that U.S. beef and pork producers’ promotion and advertising programs would be successful in expanding domestic demand when the programs make the own-price elasticity of domestic demand more inelastic and the cross-price elasticity of domestic demand more elastic with respect to import price.

Keywords

checkoffcountry of origin labelingimperfect competitionprice elasticity
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 38 , Issue 3 , December 2009 , pp. 406 - 417
Copyright
Copyright © 2009 Northeastern Agricultural and Resource Economics Association 

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