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Journal of Economic Integration 2004 June;19(2) :374-394.
Economic Effects of Agricultural Biotechnology Research in the Presence of Price-Distorting Policies

Kym Anderson Chantal Nielsen 

CEPR, and University of Adelaide Adelaide
University of Copenhagen
Copyright ©2004 Journal of Economic Integration
The economic welfare implications of some countries using new genetically modified varieties in crop production will depend on which countries choose to adopt them and on whether others (notably Western Europe) ban their importation. They also depend on existing (non-GMO-specific) agricultural policies in affected markets. This paper uses a well-received empirical economy-wide model of the global economy (GTAP) to quantify the effects of selected countries enjoying an assumed degree of productivity growth from adopting GMO maize and soybean. It does so first by leaving existing distortionary policies in place and then assuming agricultural policies in Western Europe are completely liberalised. In both cases we investigate the effects of Western Europe refraining from using GMO technology in its own farm production but without versus with a ban on imports of GM products. The results suggest that (a) such an import ban would have a large adverse effect on economic welfare, particularly in Western Europe itself, and (b) while estimated global economic welfare benefits from the new biotechnology are not greatly reduced by Europe's traditional price-distorting policies, the reductions in technology gains are concentrated in non-European countries. JEL Classifications: C68, D58, F13, O3, Q17, Q18

Keywords: GMOs | Benefits of R&D | Agricultural and trade policies
1. Alston, J.M. (1991), 'Research Benefits in a Multimarket Setting', Review of Marketing and Agricultural Economics 59(1): 23-52, April.
2. Alston, J.M. (2002), 'Spillovers', Australian Journal of Agricultural and Resource Economics 46(3): 315-46, September.
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