Estimating the Market Effect of a Food Scare: The Case of Genetically Modified StarLink Corn

Colin Carter and Aaron Smith

The Review of Economics and Statistics, 2007, vol. 89, issue 3, 522-533

Abstract: In 2000, a genetically modified corn variety called StarLink that was not approved for human consumption was discovered in the food-corn supply. To estimate the price impact of this event on the U.S. corn market, we develop the relative price of a substitute method. This method applies not only to the StarLink event but also to rare events in other markets. We find that the contamination led to a 6.8% discount in corn prices and that the suppression of prices lasted for at least a year. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2007
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