Journal Article

No. 2010-9 | February 25, 2010
Ex-Ante Regulation and Ex-Post Liability under Uncertainty and Irreversibility: Governing the Coexistence of GM Crops PDF Icon

Abstract

Ex-ante regulations and ex-post liabilities for using a new technology will induce additional costs for adopters. The standard model is advanced by including irreversibility and uncertainty and taking into account transaction costs of negotiating possible cost reductions. The case analysed is the coexistence policy for GM crops in the European Union. Results show, the design of the rules and regulations can provide strong incentives for regional agglomeration of GM and non-GM farmers.

JEL Classification

D81 L23 Q12 Q24 R3

Citation

Volker Beckmann, Claudio Soregaroli, and Justus Wesseler (2010). Ex-Ante Regulation and Ex-Post Liability under Uncertainty and Irreversibility: Governing the Coexistence of GM Crops. Economics: The Open-Access, Open-Assessment E-Journal, 4 (2010-9): 1—33. http://dx.doi.org/10.5018/economics-ejournal.ja.2010-9

Assessment

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Comments and Questions


Christian Schleyer - Theoretical framework should guide empirical work on GM adoption
March 01, 2010 - 11:53

In this well-written contribution to the debate on the determinants for the decision of farmers to adopt GM crops, or not, the authors convincingly argue, among others, that the concrete designs of ex-ante regulations and ex-post liability rules do play a decisive role if there is uncertainty and irreversibility. The ...[more]

... authors expand a model that they have published earlier by explicitly taking transaction costs into account. This is an important step in order to better understand and assess the effects of regulatory coexistence policies for GM crops.

As the authors point out in the conclusions (more) empirical studies are needed to disentangle the respective effects of different ex-ante regulations and forms of ex-post liability for contexts that may differ with respect to farm size, farm management, benefits to be gained from adopting GM crops, etc. Further, it seems also to be important to investigate different types of GM crops since they are likely to be connected with different properties of transactions and, thus, induce different costs and benefits. The theoretical framework presented by the authors seems to be a very useful tool to engage in and structure such empirical work. The insights gained from the empirics may then help to further refine the framework.

I strongly recommend this article to all readers of the Economics E-journal.