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

Colin Carter and Aaron Smith

No 25447, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists

Abstract: Genetic modification of crops has revolutionized food production, but it remains controversial due to food safety and environmental concerns. A recent food safety scare provides a natural experiment on the corn market's willingness to accept unapproved genetically modified organisms. In 2000, a genetically modified corn variety called StarLink was discovered in the food-corn supply, even though it was not approved for human consumption. To estimate the price impact of this event, we develop the relative price of a substitute method, which applies not only to the StarLink event but also to rare events in other markets. We apply this method to measure the price impact of the StarLink contamination on the U.S. corn market. We find that the contamination led to a 7 percent suppression of corn prices that lasted for at least a year.

Keywords: Food Consumption/Nutrition/Food Safety; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 38
Date: 2006
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Journal Article: Estimating the Market Effect of a Food Scare: The Case of Genetically Modified StarLink Corn (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae06:25447

DOI: 10.22004/ag.econ.25447

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