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					Biotech Labeling Regulations in the world (1)

Do Consumers Really Care about Biotech Food Label? What Do We Know? What Else Should We Know?
Southern Agricultural Economics Association Annual Meeting
January 31-February 3, 2009 Atlanta, Georgia

• Biotech food - a widely discussed topic • Fierce debates üwhether biotech food labeling is necessary üwhich labeling policy should be adopted

Xi Chen† Funing Zhong‡ Bin Zhou† † Cornell University ‡ Nanjing Agricultural University

Biotech Labeling Regulations in the world (2)

China’s Biotech Labeling China’ Regulations
• In January 2002, China required that foods containing biotech ingredients be labeled (e.g. seeds, animal feed and food products). However, the requirement was not strictly enforced until August 2003 • A central question: Does biotech labeling induce a switch in Chinese consumers’ purchasing behavior? • Why is it important? -Impact on international trade -Impact determined by 1) consumers’ acceptance of biotech food; 2) effect of labeling on consumers’ behaviors.

Biotech Oil and non-Biotech nonOil
• Biotech oil: Soybean oil and blend oil containing soybean oil • Non-Biotech oil: sunflower seed oil, peanut oil, maize germ oil, teaseed oil and safflower oil

Stated Preference
• Virtually all previous studies of consumer attitudes toward biotech food and willingness to pay in China and other countries are based on stated preference─in terms of what consumers think or perceive about biotech food
• Major defects-Contingent Valuation Method ü more often used to analyze consumers’ WTP for a certain unrepeatable goods. ü Answers to the hypothetical questions are different from actual purchasing. ü consumers may take strategic actions to influence policymaking.

• Whether biotech foods mandatory label has had an impact on consumers’ behavior still remains unknown.

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Revealed Preference (1)
• Supermarket retail sales data • Zhong et al. (2006) -In the short run, market share of biotech oils significantly decreased 4 percent as a result of biotech label enforcement. -In the long run, biotech oil would sustain a dominative market share, though small and statistically insignificant in its growing trend. • Lin et al. (2006c) -Market share of biotech oil decreased 2 percent after labeling enforcement.
100
%

Revealed Preference (2)

80

60

40

20

0
Jan. 2002 Apr. 2002 Jul02 Oct. 2002 Jan. 2003 Apr. 2003 Jul03 Oct. 2003 Jan. 2004 Apr. 2004

Biotech edible oil

Non-biotech edible oils

Labeling Effect (1)
• Comparison (Zhong et al., 2006; Lin et al., 2006c) ü demand & demand system ü sales volume & sales value ü labeling effect release • Urban household survey data • Zhong et al. (2008a) -verify market share of biotech oil -structural effect (√) -gross consumption effect (X) -verify the downward trend of biotech oil in the short run

Labeling Effect (2)
• However, Zhong et al. (2008a) does not adopt in the household survey data a variable directly describing the effect of label effect, which actually leaves the evaluation unfinished. • Meanwhile, the evaluation of the targeted labeling variable serves as the key to credibly link the aggregate retail sales data and micro household survey data. • A central question: -based on household survey data, is there direct evidence supporting the role played by biotech label?

Household Survey Data
• sample size-1000 • buyer’s demographic Characteristics; risk Consciousness; household socioeconomic factors

Attitudes Toward “Biotech” (1) Biotech”

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Attitudes Toward “Biotech” (2) Biotech”
• IV -1st Stage • Variable -Mdaccess -Gmolabel -Gmo

Instrumental Variable Approach

Instrumental Variable Approach
• IV -2nd Stage -IV Probit -2005 • IV -2nd Stage -IV Probit -2003-2005

What Else Should We Know? (1) Long Run Effect • Marginal effects -IV Probit -Gmolabel (-7.5%; 10.5%) -Gmo (12.3%; 12.7%) • With a test of individual consumers’ decisionmaking, our results show direct support to a series of studies (Zhong et al., 2006; Lin et al., 2006c). • Do those compatible findings reflect the overall market trend in the long run?

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What Else Should We Know? (2) Long Run Effect
• Time period expansion -whether consumers’ purchasing decisions are not stable and prone to change -whether the influence of regulation policy on the market share would stabilize • Rapid changes in the structure of supermarkets over time suggests need for regular updates. • The uneven development in supermarkets across locations suggest an expansion of this kind of analysis to other regions, especially smaller-sized cities and rural areas. • Massive migration, biotech oil and informal market

What Else Should We Know? (3) Revealed or Stated Preference
• Do Chinese consumers express greater concern over food safety than their counterparts in developed countries? • Discrepancy between concern over food safety and purchasing behavior matters. • Influencing Factors concern over food safety; belief in governmental food safety regulation and food label; concern over price; knowledge of biotech food; strategic behavior; convenient to buy or not • All these factors are revealed in consumers’ actual choices, but might not in their stated preferences. Empirical researches applying actual sales (purchasing) data deliver more reliable policy implications.

What Else Should We Know? (4) Revealed or Stated Preference
• However, in some circumstances we have to apply survey data of stated preferences, which leads us to consider factors influencing the discrepancy between stated preferences and revealed preferences. • Discrepancy? -abstract cognition and real world perception (level of education and/or beliefs in food safety across different market channels) • Solution? -Distinguish questions

What Else Should We Know? (5) Data Compatibility
• Contradictory results in the long run -(Zhong et al., 2006, Zhong et al. 2008b) • Supermarket Sales & Household Survey • Influencing Factors ü Individual buyers & other social entities ü Crowd out effect ü Consumption diversification ü Dining out ü Acceleration of urbanization ü Shrinking family size ü ……

What Else Should We Know? (6) Who makes decisions?

What Else Should We Know? (7) More Marketing Strategies?

üIndividual buyers & Other social entities (√) üCrowd out effect (√) üConsumption diversification (X) üDining out (√) üAcceleration of urbanization (√X) üShrinking family size (√X) ü……

• Other marketing strategies taken by stores and manufacturers that may affect the sales of edible oils have not been considered. -Advertisement -Sales promotion -……

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Thank you very much!

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posted:12/18/2009
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