Governing the Co-Existence of GM Crops: Ex-Ante Regulation and Ex-Post Liability Under Uncertainty and Irreversibility

ICAR Discussion Paper No. 12/2006

24 Pages Posted: 13 Dec 2006

See all articles by Volker Beckmann

Volker Beckmann

Humboldt University of Berlin - Resource Economics

Claudio Soregaroli

Catholic University of the Sacred Heart of Milan - Catholic University of the Sacred Heart of Piacenza

Justus Wesseler

Agricultural Economics and Rural Policy Group, Wageningen University

Date Written: March 2006

Abstract

The future institutional environment for the co-existence of genetically modified (GM) crops, conventional crops and organic crops in Europe combines measures of ex-ante regulation and ex-post liability rules. Against this background we ask the following two questions: How does ex-ante regulation and ex-post liability under irreversibility and uncertainty affect the adoption of GM crops? What are the implications for regional agglomeration of GM and non-GM crops? Ex-ante regulations and ex-post liabilities for using GM crops will induce additional costs. These costs are modelled in a classical way. The model is advanced by including irreversibility and uncertainty and taking into account transaction costs of negotiating possible solutions with neighbouring farmers which are assumed to be partially irreversible. The results show that the design of ex-ante regulation and ex-post liability increases the value of waiting and results in less immediate adoption of the GM technology. Additionally, the rules and regulations in the EU do provide incentives for the regional agglomeration of GM and non-GM crops that are mainly driven by the irreversibility effect of the ex-ante regulatory and ex-post liability costs.

Keywords: Co-existence, GM crops, liability law, public regulation, technology adoption

JEL Classification: K13, O33, Q18

Suggested Citation

Beckmann, Volker and Soregaroli, Claudio and Wesseler, Justus, Governing the Co-Existence of GM Crops: Ex-Ante Regulation and Ex-Post Liability Under Uncertainty and Irreversibility (March 2006). ICAR Discussion Paper No. 12/2006, Available at SSRN: https://ssrn.com/abstract=951159 or http://dx.doi.org/10.2139/ssrn.951159

Volker Beckmann

Humboldt University of Berlin - Resource Economics ( email )

Berlin
Germany
+493020936388 (Phone)
+493020936339 (Fax)

Claudio Soregaroli

Catholic University of the Sacred Heart of Milan - Catholic University of the Sacred Heart of Piacenza ( email )

Via Emilia Parmense, 84
Piacenza
Italy

Justus Wesseler (Contact Author)

Agricultural Economics and Rural Policy Group, Wageningen University ( email )

Hollandseweg 1
Wageningen, 6706 KN
Netherlands

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