Genetically Modified Crops: Their Market and Welfare Impacts

Posted: 16 Feb 2007

See all articles by Sergio H. Lence

Sergio H. Lence

Iowa State University - Department of Economics

Dermot J. Hayes

Iowa State University - Center for Agriculture and Rural Development (CARD)

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Abstract

A framework is developed for examining price and welfare effects of the introduction of genetically modified (GM) products. In the short run, non-GM grain generally becomes another identity-preserved product. However, more profound market effects are observed under some reasonable parameterizations. When calibrated to reflect the U.S. corn market, introducing GM technology increases aggregate welfare over a wide range of scenarios, unless the corresponding production cost savings are small and consumers are seriously concerned about GM products. The possibility that GM technology may reduce aggregate welfare is interesting because the model assumes rational agents and does not include regulatory constraints.

Suggested Citation

Lence, Sergio H. and Hayes, Dermot James, Genetically Modified Crops: Their Market and Welfare Impacts. American Journal of Agricultural Economics, Vol. 87, No. 4, pp. 931-950, November 2005, Available at SSRN: https://ssrn.com/abstract=963674 or http://dx.doi.org/10.1111/j.1467-8276.2005.00779.x

Sergio H. Lence (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States

Dermot James Hayes

Iowa State University - Center for Agriculture and Rural Development (CARD) ( email )

Ames, IA 50011
United States
515-294-6185 (Phone)

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