Effects Of Food Safety Regulation Based On Consumers' Perspective

At current stage,China's food safety is generally stable,however,the abuse of veterinary antibiotics in livestock is severe,which raises the concern of veterinary antibiotic residues in foods.As the world's largest producer and user of antibiotics,China lacks specific and effective food safety instruments to regulate the use of antibiotics in livestock,which contributes to the increasing of antibiotic resistance and the emergence of "super bacteria",posing threats to human health.This study selects the severe food safety issue of antibiotic abuse in raising pigs,aims to understand possible choices of regulatory tools,and analyzes the variation of market behaviors and social welfare caused by the implementation of regulatory tools,providing an ex ante cost-benefit analysis for policy makers,which helps to optimize existing food safety regulation policy.The main contents and conclusions of this study are as follows:First of all,by conducting a laboratory experiment on 300 consuners,we obtain participants' preferences and willingness to pay for two types of pork(ordinary pork and antibiotic-free pork).Then,based on the tobit random effect model,we test the impact of information on consumers' WTP of both pork.The information that we reveal to participaints include:the usage of antibiotics when raising pigs,and its impact on health and environment,as well as basic information about antibiotic-free pork.Results show that information can significantly change participants' WTP of both pork,and the variation of WTP before and after information disclosure is relatively large.With the disclosure of information,participants lower their WTP for regular pork and increase their WTP for antibiotic-free pork.Compared with no information provided,the average WTP of antibiotic-free pork increase by 31.9%after 5 rounds of messages,while the average WTP of regular pork decrease by 16.3%,showing that the information disclosure has a greater effect on antibiotic-free pork and Chinese consumers have a greater preference for this kind of pork.When comparing the effect of 5 different types of information,it is shown that the impact of environmental information and children's health information is relatively large.In addition,it is shown that the effects of message differ in different age groups.Secondly,from the perspective of consumers,we analyze the regulatory effect of information disclosure.Based on the WTP elicited from the experiment and real consumption scenarios of pork market in China,we simulate the impact of information disclosure on consumer welfare and market share of both pork.Results show that:First,consumer welfare is maximized under perfect information in both short term and long term.Perfect information enables consumers to fully internalize losses and benefits,so the government does not need to use additional tax or subsidy tools.Second,under the imperfect information,consumer surplus is maximized when conducting per-unit tax and per-unit subsidy altogether.Specifically,the optimal per-unit tax and per-unit subsidy is 1.5 yuan and 3.5 yuan respectively in the short-term,and 4.5 yuan and 6.5 yuan in the long-term.Conducting tax and subsidy altogether can greatly ease the excessive distortion of consumer welfare.Third,in the absence of information disclosure,the optimal tax is much higher than that under information disclosure,indicating that in order to compensate for the lack of information,the government needs to impose higher taxes.Fourth,regulations can affect the variation of market share for both pork.The market share of regular pork decreases,while the market share of antibiotic-free increases.In the long term,the market share of regular pork may even face a 100%decline.The reason maybe that high subsidy and tax push consumers to purchase antibiotic-free pork,even at the expense of product diversity.The huge variation of market share also confirms the variation of participants' WTP in the experiment.Given China's huge population and pork consumption,a small increase of the proportion of consumers who are willing to purchase antibiotic-free pork would create a huge market.Fifth,considering the total pork consumption of Chinese people in 2015,the variation of consumer surplus would reach 100 billion yuan.This huge welfare gain highlights the necessity and urgency of introducing regulatory policy on tackling pork's antibiotic issue.Thirdly,the regulatory effects of food standards and food labels are studied.Specifically,based on a partial equilibrium model,results from the lab experiment and parameters from the Chinese pork market are used to analyze the impact of food standards and food labels on market equilibrium and social welfare.Results show that:First,the implementation of antibiotic-free standard can cause a significant increase in total welfare(14.61%).For producers,the food standard not only improves the quality of pork,but also increases production costs.Compared with the baseline scenario,the price of pork increases by 9.42%,but producers' profit decreases.For consumers,the negative effect of price increase is offset by the disappearance of cost of ignorant,so the consumer welfare increases by 208.92 billion yuan.Second,after the implementation of antibiotic-free label under information disclosure,the proportion of producers that choose to produce antibiotic-free pork accounts for 50%,which means that when nearly half of the producers choose the new segment,for a single producer,the marginal profit of both markets equals,so that no additional producers would change strategies and the two segments reach equilibrium.At this time,the price of antibiotic-free pork is 66.9%higher than that of regular pork,and the new segment accounts for half of the total market share.In general,the implementation of antibiotic-free label under the disclosure of information is beneficial to producers(producers' profit increases by 260.8 billion yuan);but for consumers,the relative high price of antibiotic-free pork causes the loss of consumer welfare(consumers'surplus decreases 207.24 billion yuan.)However,the total welfare gains because the loss of consumer surplus is offset by the welfare increase in the antibiotic-free market.Third,the welfare gain from the antibiotic-free standard(14.61%)is generally greater than that from the antibiotic-free label(4.17%).However,the socially optimal welfare comes from the antibiotic-free label,but this optimal welfare cannot be reached by market force only.Instead,it requires the government to regulate the optimal number of producers in the new segment.Since it is difficult for the government to know the real profits of producers,it is difficult to regulate the number of producers,therefore,policy makers may prefer the food standard.Fourth,although the "raised antibiotic-free" standard for pork production is more stringent and difficult to implement,it is more beneficial to the social welfare than that of the "reasonable use"standard.However,the former standard is more difficult to promote.In summary,regulations as food labels and food standards can bring about hundreds million yuan,showing that the government needs to conduct relevant policies to regulate the excessive use of veterinary antibiotics in the hog industry in China.At last,our research perspective turns back to the pig industry chain and mainly focuses on the transaction of pigs.The information asymmetry in food safety issue exists not only between consumers and producers,but also within the industry chain itself.By using the theory of Intermediaries,we analyze theoretically how the quality information can be transmitted through the introduction of intermediaries.Those intermediaries play the roles of "quality expert" and "middleman",they test and assess pigs' quality,then transmit the quality information,which helps reduce the information asymmetry between sellers and buyers of pig and improve the efficiency of the hog market.In addition,those intermediaries can also feed back the structural changes in the pork consumption sector to the production sector,which contributes to the interaction between production and consumption,and further stimulates producers to focus on quality control.The possible contributions of this study are as follows:Firstly,this study contributes to the literature on antibiotics by studying consumers' choices in presence of antibiotic-free pork.Besides epidemiological and medical papers,no previous economic paper studies the impact of veterinary antibiotics in China.In particular,the Chinese consumers' acceptance for antibiotic-free meat was fully overlooked.In this study,consumers' WTP for both regular pork and antibiotic-free pork are obtained by conducting a lab experiment.Consumers' WTP is crucial for decision makers when considering regulatory policies.It also provides market incentives for producers to improve production process and provide safer foods,which affects the development of related food markets.Secondly,this study also contributes to the literature on experimental economics,by offering a welfare analysis coming from consumers,WTP.By combining real consumption scenario of Chinese pork market with WTP from the experiment,we simulate the real purchase choices of consumers,the variation of market share and consumer welfare.Beyond the WTP and the value of information,estimations of impacts caused by regulatory policies are precious for advising policymakers.Thirdly,for decision makers,instruments choice is hard to make,since this not only requires good estimates of consumers' WTP for better products,but also needs reliable and quantified economic estimates about impacts of different regulatory tools.For the Chinese pork market,we develop a partial-equilibrium model that specifically accounts for the introduction of a MQS and generic information disclosure with emerging labels,such as the antibiotic-free pork.We calibrate the economic model using parameter from a lab experiment in China and previous econometric studies of the Chinese pork sector,thus,consumers' real preference and knowledge are used in our work to detail all costs and benefits which should be taken into account by decision-makers.With the integration of experimental results in the calibrated model,different regulatory scenarios may be tested ex ante,namely before the effective implementation of regulatory policies in China,so as to help policy makers evaluate effective food safety regulatory policies and optimize existing regulatory tools.