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Abstract

The FDA Food Safety Modernization Act of 2010 is new legislation that mandates, among other things, new food safety standards. The act includes a clause that exempts small firms from new regulatory requirements. This paper investigates the effects of a small firm exemption from more stringent food safety standards. The model compares food safety, total output and the number of market participants for different food safety regulation with and without an exemption for small firms. The numerical examples show that a more stringent food safety regulation increases food safety, increases the price of food, decreases the total output and decreases the number of firms. A new food safety standard with an exemption for small firms increases the average food safety but not as much as with a new standard alone. An exemption for small firms causes the total number of firms to increase.

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