Governing the co-existence of GM crops : ex-ante regulation and ex-post liability under uncertainty and irreversibility

V. Beckmann, C. Soregaroli, J.H.H. Wesseler

Research output: Working paperAcademic

Abstract

The future institutional environment for the co-existence of genetically modified (GM) crops, conventional crops and organic crops in Europe combines measures of ex-ante regulation and ex-post liability rules. Against this background we ask the following two questions: How does ex-ante regulation and ex-post liability under irreversibility and uncertainty affect the adoption of GM crops? What are the implications for regional agglomeration of GM and non-GM crops? Ex-ante regulations and ex-post liabilities for using GM crops will induce additional costs. These costs are modelled in a classical way. The model is advanced by including irreversibility and uncertainty and taking into account transaction costs of negotiating possible solutions with neighbouring farmers which are assumed to be partially irreversible. The results show that the design of ex-ante regulation and ex-post liability increases the value of waiting and results in less immediate adoption of the GM technology. Additionally, the rules and regulations in the EU do provide incentives for the regional agglomeration of GM and non-GM crops that are mainly driven by the irreversibility effect of the ex-ante regulatory and ex-post liability costs.
Original languageEnglish
Place of PublicationBerlin
PublisherICAR
Number of pages20
Publication statusPublished - 2006

Publication series

NameICAR discussion paper
PublisherICAR
No.12/2006

Keywords

  • regulations
  • european union
  • law
  • transgenic plants
  • genetic engineering
  • biotechnology
  • crops
  • uncertainty
  • costs
  • environmental economics

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