Genetically Modified Crops and Product Differentiation: Trade and Welfare Effects in the Soybean Complex

Posted: 20 Dec 2005

See all articles by Andrei Sobolevsky

Andrei Sobolevsky

Sprint

GianCarlo Moschini

Iowa State University - Department of Economics

Harvey E. Lapan

Iowa State University - Department of Economics

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Abstract

A partial equilibrium four-region world trade model for the soybean complex is developed in which Roundup Ready (RR) products are weakly inferior substitutes to conventional ones, RR seeds are priced at a premium, and costly segregation is necessary to separate conventional and biotech products. Solution of the calibrated model illustrates how incomplete adoption of RR technology arises in equilibrium. The United States, Argentina, Brazil, and the Rest of the World (ROW) all gain from the introduction of RR soybeans, although some groups may lose. The impacts of RR production or import bans by the ROW or Brazil are analyzed. U.S. price support helps U.S. farmers, despite hurting the United States and has the potential to improve world efficiency.

Keywords: biotechnology, differentiated demand, identity preservation, international trade, soybeans

Suggested Citation

Sobolevsky, Andrei and Moschini, GianCarlo and Lapan, Harvey E., Genetically Modified Crops and Product Differentiation: Trade and Welfare Effects in the Soybean Complex. American Journal of Agricultural Economics, Vol. 87, No. 3, pp. 621-644, August 2005, Available at SSRN: https://ssrn.com/abstract=856521 or http://dx.doi.org/10.1111/j.1467-8276.2005.00752.x

Andrei Sobolevsky

Sprint

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GianCarlo Moschini (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
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Harvey E. Lapan

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515 294-5917 (Phone)

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