The Impacts of Food Safety Modernization Act on Food Suppliers: An Implication on the U.S and Foreign Tomato Producers with Different Sized Farms

The rising concerns of foodborne illness and the globalization of food production, distribution, and retail marketing have been accompanied by an evolution in the rules and regulations that attempt to govern and improve food safety. That evolution continues with the passage of the Food Safety Modernization Act (FSMA) in 2011. The FSMA aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it. The compliance costs of FSMA will have substantial structural impacts on both domestic and import food producers. For instance, compliance costs will raise food prices and more importantly, they will also impose different cost burdens on different sized farms. This paper aims to measure impacts of FSMA on domestic or import tomato producers with different size of farms. Specifically, this paper has twofold: 1) Price elasticity of tomatoes are estimated with a model that fit the data best. In this step, log-likelihood ratio test is conducted to choose the best model from the General, Rotterdam, AIDS, NBR and CBS models. 2) Based on the price elasticity estimated in the first step, the revenue changes of tomato producers after adopting FSMA are estimated in the second step.

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 Record created 2017-04-01, last modified 2018-01-23

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