Transcript GMO Regulations and Food Self

GMO Regulations and Food SelfSufficiency Rate
Qianqian Shao, Maarten Punt, Justus Wesseler
Technische Universität München
TUM
1
Main Idea
• Using a standard political economy model to
show the GMO policy as an outcome of the
political process.[Grossman Helpman (1994)
and Eerola (2004)]
• Lobbying cost and GM regulations affect Food
Self-Sufficiency Rate(SSR)s.
TUM
2
Previous Studies
• Josling et al. (2003): political economy analysis is
important to show consumer preferences and
conflicting pressure on governments.
• Graff et al. (2009): conceptual political economy
framework of formulating biotechnology
regulations.
• Swinnen and Vandemoortele (2011): dynamic
political economy model to explain regulation in
the EU and US.
TUM
3
Food Self-sufficiency Rate
TUM
4
GM Regulations and SSR
• Many countries with different SSR have a
similar biotechnology agricultural policies.
• A government cannot ignore domestic food
availability concerns while formulating
agricultural policies.
• The level of GM input may influence food
supply in a country.
TUM
5
Paper Structure
• Socially determined GMO regulations
• Politically determined GMO regulations
• GMO regulations with SSR
TUM
6
The Economy
• Production (domestic)
Two sectors:
– Tradable numeraire goods z
– Agricultural food sector including two firms
• GM firm: GM input (g), regulated to 𝑔 and
conventional inputs (q)
• Non-GM firm: q
TUM
7
Production
o Production function
• GM firm: xG  kf ( g , q) (k  1)
N
x
 f (q)
• Non-GM firm:
o Profit function
• GM firm:  G  pG ( xG )  kf ( g , q)  cG ( g , q)
N
N
N
N


p
(
x
)

f
(
g
,
q
)

c
( g , q)
• Non-GM firm:
TUM
(1)
(2)
8
Consumers
• Three kinds of consumers
– α :GM group
– β: Non-GM group
– (1-α-β): neither group
• Consumers in either GM or non-GM group
should make contributions to the group for
lobbying, and share the profits.
TUM
9
Consumers (cont.)
• The net income of consumers in each group:
(3)
1
1
I  w 
I  w 

1

 G ( pG , g , q) 
 ( p , g , q) 
N
N
1


B ( g )
B ( g )
I1   w
TUM
10
Consumers (cont.)
• The utility function
j
{
z

u
(
y
)  D( g )}
max
z, y j
j
s.t.I i  z   p j yij
j  G, N
i


,

,1




for
,
n 1
• The demand functions:
G
G
N


y

(1




)
d
(
p
,
p
), j  G

j
y  N
G
N

y

(1




)
d
(
p
,
p
), j  N


TUM
11
Socially determined GMO level
• The domestic aggregate gross welfare
W ( g )  w   j cs ( g )   j  ( g )  D( g )
j
j
yG
where  j cs j ( g )  
yN
p G dy G 
0
and
(4)
j
G
N

(
g
)




j

p N dy N  p G y G  p N y N
0
, D( g )   g
TUM
12
Socially determined GMO level (cont.)
• The aggregate welfare of each group:
W   w   cs ( g )   D( g )   ( p , g , w)
G
G
G
(5)
W   w   cs ( g )   D( g )   ( p , g , w)
N
N
N
W1   (1   )w  (1   )csG (g )  (1   )cs N (g )  (1   )D(g )
TUM
13
Socially determined GMO level (cont.)
• The effects of changing GM policy on welfare:
W ( g )
  ( p , g , w)   [cs ( g )  D ( g )]
(6)
g

W ( g )
g
G
g
G
G
g
g
  gN ( p N , g , w)   [csgN ( g )  Dg ( g )]
W1   ( g )
g
 (1     )[ j csgj ( g )  Dg ( g )]
where cs (g)  0,  (g )  0, cs (g)  0 ,  (g )  0 , D  0
• The socially optimal GM input level is
determined by:
G
g
G
g
N
g
N
g
W ( g ) W ( g *) W ( g *) W1  ( g *)



0
g
g
g
g
TUM
g
(7)
14
The Political Process
• Government payoff function:
G( g; C , C )  aW ( g )  C ( g )  C ( g )
(8)
and C ( g )  max[0,(W  B )]
• Lobbying cost of each group:
i
i
i
Bi ( g )  (1  i )Ci ( g )
(9)
• The optimal contribution level of each group:
W ( g )
C ( g )
(10)
 (1   )
*
i
i
g
i
g
TUM
15
The Political Process (cont.)
• The optimal politically determined GM policy:
G( g )
W ( g ) C ( g ) C ( g )
(11)
a


0
g
g
g
g
• Rewrite the equation:
(12)
 W ( g )
W
(g )
 W ( g )  1
G ( g )  1
g

 a
1






g

 a
1






g
a
1  
g
0
• The lobbying process changed the outcome of
GM regulations from social point of view. The
change of welfare benefit or loss depends on the
lobbying efficiency of two groups.
TUM
16
GMO regulations with SSR
• From
G( g )
W ( g ) C ( g ) C ( g )
a


0
g
g
g
g
(11)
Wi ( g )
Ci* ( g )
 (1  i )
g
g
and
(10)
we found that the more concern on contributions,
the less concern on the welfare.
• If the government is more inclined to listen to the
lobbying groups, it consider the SSR less.
TUM
17
GMO regulations with SSR (cont.)
• Rewriting the lobbying costs:

0  s 1
B ( g )  (1  )C ( g )
where
s
• The contribution equilibrium:
i
i
i
(13)
Wi ( g )
i Ci* ( g )
 (1  )
g
s
g
(14)
• Interest groups have less incentive for lobbying
due to the less increase in welfare from more
contribution in a low SSR country.
• The lobbying behavior is more efficient when the
SSR is high, that is, (1   )  (1   )
i
i
sl
sh
TUM
18
GMO regulations with SSR (cont.)
• We conclude our discussion that since a lower
lobbying cost, lobbying is more efficient in a high
SSR country.
• If the government pays more attention to the
social welfare than contributions from the
lobbying groups, the GM regulation will be less
strict, and the SSR will be increased.
• Or: If in a low SSR country, GM regulation is
strict, the government pays less attention to SSR.
TUM
19
GMO regulations with SSR (cont.)
• We proved the result by comparing the
marginal effects of changing GM policy to the
government payoff in a low SSR country to a
high SSR country: Ggs  Ggs  0.
• A stricter GM regulation will not induce a
higher payoff effect to the government in a low
SSR country, so the policy will be lenient.
l
h
TUM
20
Summary
• Using a standard political economy model to
explain the reasons behind the GM policy
outcomes.
• Different SSR is influenced by the GM
lobbying policy. A stricter GM policy will
affect a country’s SSR.
• In a country with a low SSR and strict GM
policy, the non-GM lobby group has a stronger
influence on government policy than the GM
lobby group.
TUM
21
TUM
22