IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v50y2019i3p615-644.html
   My bibliography  Save this article

Valuing product innovation: genetically engineered varieties in US corn and soybeans

Author

Listed:
  • Federico Ciliberto
  • GianCarlo Moschini
  • Edward D. Perry

Abstract

We develop a discrete‐choice model of differentiated products for US corn and soybean seed demand to study the welfare impact of genetically engineered (GE) crop varieties. Using a unique data set spanning the period 1996–2011, we find that the welfare impact of the GE innovation is significant. In the last five years of the period analyzed, our preferred counterfactual indicates that total surplus due to GE traits was $5.18 billion per year, with seed manufacturers appropriating 56% of this surplus. The seed industry obtained more surplus from GE corn, whereas farmers received more surplus from GE soybeans.

Suggested Citation

  • Federico Ciliberto & GianCarlo Moschini & Edward D. Perry, 2019. "Valuing product innovation: genetically engineered varieties in US corn and soybeans," RAND Journal of Economics, RAND Corporation, vol. 50(3), pages 615-644, September.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:3:p:615-644
    DOI: 10.1111/1756-2171.12290
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1756-2171.12290
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1756-2171.12290?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daniel A. Ackerberg & Marc Rysman, 2005. "Unobserved Product Differentiation in Discrete-Choice Models: Estimating Price Elasticities and Welfare Effects," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 771-788, Winter.
    2. Giancarlo Moschini & Harvey Lapan & Andrei Sobolevsky, 2000. "Roundup ready® soybeans and welfare effects in the soybean complex," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 33-55.
    3. Moschini, GianCarlo, 2010. "Competition Issues in the Seed Industry and the Role of Intellectual Property," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 25(2), pages 1-14.
    4. Jonas Björnerstedt & Frank Verboven, 2016. "Does Merger Simulation Work? Evidence from the Swedish Analgesics Market," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 125-164, July.
    5. Edward D. Perry & GianCarlo Moschini & David A. Hennessy, 2016. "Testing for Complementarity: Glyphosate Tolerant Soybeans and Conservation Tillage," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 765-784.
    6. Baffes, John & Haniotis, Tassos, 2010. "Placing the 2006/08 commodity price boom into perspective," Policy Research Working Paper Series 5371, The World Bank.
    7. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
    8. Jerry A. Hausman, 1996. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Chapters, in: The Economics of New Goods, pages 207-248, National Bureau of Economic Research, Inc.
    9. Aviv Nevo, 2011. "Empirical Models of Consumer Behavior," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 51-75, September.
    10. Magnier, Alexandre & Kalaitzandonakes, Nicholas G. & Miller, Douglas J., 2010. "Product Life Cycles and Innovation in the US Seed Corn Industry," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61779, Agricultural and Applied Economics Association.
    11. Greg Allenby & Jeff Brazell & John Howell & Peter Rossi, 2014. "Economic valuation of product features," Quantitative Marketing and Economics (QME), Springer, vol. 12(4), pages 421-456, December.
    12. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    13. Julian M. Alston & Philip G. Pardey, 1996. "Making Science Pay: The Economics of Agricultural R&D Policy," Books, American Enterprise Institute, number 53242, September.
    14. David A. Hennessy, 2006. "On Monoculture and the Structure of Crop Rotations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 900-914.
    15. GianCarlo Moschini, 2008. "Biotechnology and the development of food markets: retrospect and prospects," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 35(3), pages 331-355, September.
    16. Huffman, Wallace E. & Evenson, Robert E., 1993. "Science for Agriculture: A Long Term Perspective," Staff General Research Papers Archive 10997, Iowa State University, Department of Economics.
    17. Bigelow, Daniel & Borchers, Allison, 2017. "Major Uses of Land in the United States, 2012," Economic Information Bulletin 263079, United States Department of Agriculture, Economic Research Service.
    18. Harvey E. Lapan & Giancarlo Moschini, 2004. "Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 634-648.
    19. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    20. Nathan P. Hendricks & Aaron Smith & Daniel A. Sumner, 2014. "Crop Supply Dynamics and the Illusion of Partial Adjustment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1469-1491.
    21. Guanming Shi & Jean-Paul Chavas & Kyle Stiegert & Xiangyi Meng, 2012. "An analysis of bundle pricing: the case of biotech seeds," Agricultural Economics, International Association of Agricultural Economists, vol. 43, pages 125-139, November.
    22. Clancy, Matthew & Fuglie, Keith & Heisey, Paul, 2016. "U.S. Agricultural R&D in an Era of Falling Public Funding," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, issue 10, pages 1-1, November.
    23. Fernandez-Cornejo, Jorge & Caswell, Margriet, 2006. "The First Decade of Genetically Engineered Crops in the USA," Economic Information Bulletin 33897, United States Department of Agriculture, Economic Research Service.
    24. Elizabeth Nolan & Paulo Santos, 2012. "The Contribution of Genetic Modification to Changes in Corn Yield in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(5), pages 1171-1188.
    25. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    26. Geoffrey Barrows & Steven Sexton & David Zilberman, 2014. "Agricultural Biotechnology: The Promise and Prospects of Genetically Modified Crops," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 99-120, Winter.
    27. Matthew S. Clancy & GianCarlo Moschini, 2017. "Intellectual Property Rights and the Ascent of Proprietary Innovation in Agriculture," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 53-74, October.
    28. Gregory D. Graff & Gordon C. Rausser & Arthur A. Small, 2003. "Agricultural Biotechnology's Complementary Intellectual Assets," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 349-363, May.
    29. Aviv Nevo, 2003. "New Products, Quality Changes, and Welfare Measures Computed from Estimated Demand Systems," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 266-275, May.
    30. Matthew S. Clancy & GianCarlo Moschini, 2017. "Intellectual Property Rights and the Ascent of Proprietary Innovation in Agriculture," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 53-74, October.
    31. repec:bla:jindec:v:50:y:2002:i:3:p:237-63 is not listed on IDEAS
    32. Wright, Brian D., 2012. "Grand missions of agricultural innovation," Research Policy, Elsevier, vol. 41(10), pages 1716-1728.
    33. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1.
    34. Laura Grigolon & Frank Verboven, 2014. "Nested Logit or Random Coefficients Logit? A Comparison of Alternative Discrete Choice Models of Product Differentiation," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 916-935, December.
    35. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
    36. José Benjamin Falck-Zepeda & Greg Traxler & Robert G. Nelson, 2000. "Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 360-369.
    37. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    38. Fernandez-Cornejo, Jorge & Livingston, Michael J. & Mitchell, Lorraine & Wechsler, Seth, 2014. "Genetically Engineered Crops in the United States," Economic Research Report 164263, United States Department of Agriculture, Economic Research Service.
    39. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    40. Guanming Shi & Kyle W. Stiegert & Jean P. Chavas, 2011. "An analysis of bundle pricing in horizontal and vertical markets: The case of the U.S. cottonseed market," Agricultural Economics, International Association of Agricultural Economists, vol. 42, pages 77-88, November.
    41. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
    42. Jerry A Hausman & Gregory K Leonard, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
    43. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    44. Magnier, Alexandre & Kalaitzandonakes, Nicholas G. & Miller, Douglas J., 2010. "Product Life Cycles and Innovation in the US Seed Corn Industry," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 13(3), pages 1-20, September.
    45. מחקר - ביטוח לאומי, 2006. "Summary for 2005," Working Papers 29, National Insurance Institute of Israel.
    46. Andrei Sobolevsky & GianCarlo Moschini & Harvey Lapan, 2005. "Genetically Modified Crops and Product Differentiation: Trade and Welfare Effects in the Soybean Complex," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 621-644.
    47. Alon Eizenberg, 2014. "Upstream Innovation and Product Variety in the U.S. Home PC Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(3), pages 1003-1045.
    48. Bresnahan, Timothy F, 1987. "Competition and Collusion in the American Automobile Industry: The 1955 Price War," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 457-482, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Seungki Lee & GianCarlo Moschini, 2020. "Estimating the Value of Innovation and Extension Information: SCNResistant Soybean Varieties," Center for Agricultural and Rural Development (CARD) Publications 20-wp603, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Raj Chandra & Gabriel E. Lade & GianCarlo Moschini, 2021. "Geographical Indications and Welfare: Evidence from the US Wine Market," Center for Agricultural and Rural Development (CARD) Publications 21-wp628, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Scheitrum, Daniel & Schaefer, K. Aleks & Nes, Kjersti, 2020. "Realized and potential global production effects from genetic engineering," Food Policy, Elsevier, vol. 93(C).
    4. Du, Xiaodong & Feng, Hongli & Hennessy, David A., 2021. "Implications of WTP-AFP Discrepancy, Premium Subsidy Reduction and Program Changes in U.S. Crop Insurance," 2021 Annual Meeting, August 1-3, Austin, Texas 313881, Agricultural and Applied Economics Association.
    5. Marinakis, Yorgos D. & Walsh, Steven T. & White, Reilly, 2024. "What is the relationship between sociotechnical transition and disruptive innovations?," Technological Forecasting and Social Change, Elsevier, vol. 199(C).
    6. MacDonald, James M. & Dong, Xiao & Fuglie, Keith O., 2023. "Concentration and Competition in U.S. Agribusiness," Economic Information Bulletin 337566, United States Department of Agriculture, Economic Research Service.
    7. Lee, Yunkyung & Perrin, Richard K. & Fulginiti, Lilyan E., 2022. "Potential Economic Impacts of Gene-edited High-oleic Soybeans," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322392, Agricultural and Applied Economics Association.
    8. Seungki Lee & Yongjie Ji & GianCarlo Moschini, 2021. "Agricultural Innovation and Adaptation to Climate Change: Insights from Genetically Engineered Maize," Center for Agricultural and Rural Development (CARD) Publications 21-wp616, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    9. Brown, Zachary S. & Connor, Lawson & Rejesus, Roderick M. & Yorobe, Jose M., 2021. "Landscape-level feedbacks in the demand for transgenic pesticidal corn in the Philippines," Ecological Economics, Elsevier, vol. 180(C).
    10. Jennifer Syme & Henry An & Mohammad Torshizi, 2024. "Estimating the effect of time‐invariant characteristics in panel data: wheat adoption in Western Canada," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 828-851, March.
    11. Luo, Jinjing & Moschini, GianCarlo & Perry, Edward D., 2023. "Switching costs in the US seed industry: Technology adoption and welfare impacts," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    12. Seungki Lee & GianCarlo Moschini, 2022. "On the value of innovation and extension information: SCN‐resistant soybean varieties," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1177-1202, August.
    13. Edward D. Perry & David A. Hennessy & GianCarlo Moschini, 2022. "Uncertainty and learning in a technologically dynamic industry: Seed density in U.S. maize," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1388-1410, August.
    14. Lee, Seungki & Moschini, GianCarlo & Perry, Edward D., 2023. "Genetically engineered varieties and applied pesticide toxicity in U.S. maize and soybeans: Heterogeneous and evolving impacts," Ecological Economics, Elsevier, vol. 211(C).
    15. Jared Hutchins & Brent Hueth, 2023. "100 years of data sovereignty: Cooperative data governance and innovation in US dairy," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1551-1576, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luo, Jinjing & Moschini, GianCarlo & Perry, Edward D., 2023. "Switching costs in the US seed industry: Technology adoption and welfare impacts," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    2. Seungki Lee & GianCarlo Moschini, 2020. "Estimating the Value of Innovation and Extension Information: SCNResistant Soybean Varieties," Center for Agricultural and Rural Development (CARD) Publications 20-wp603, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Tovar, Jorge, 2012. "Consumers’ Welfare and Trade Liberalization: Evidence from the Car Industry in Colombia," World Development, Elsevier, vol. 40(4), pages 808-820.
    4. Steven T. Berry & Philip A. Haile, 2021. "Foundations of Demand Estimation," Cowles Foundation Discussion Papers 2301, Cowles Foundation for Research in Economics, Yale University.
    5. Leheyda, Nina, 2008. "Private Incentives to Innovate: Interplay of New Products and Brand-Name Reputation," ZEW Discussion Papers 08-120, ZEW - Leibniz Centre for European Economic Research.
    6. Keith Head & Thierry Mayer, 2021. "Poor Substitutes? Counterfactual methods in IO and Trade compared," Working Papers 2021-11, CEPII research center.
    7. Seungki Lee & GianCarlo Moschini, 2022. "On the value of innovation and extension information: SCN‐resistant soybean varieties," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1177-1202, August.
    8. Bokhari, Farasat A.S. & Mariuzzo, Franco, 2018. "Demand estimation and merger simulations for drugs: Logits v. AIDS," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 653-685.
    9. WATANABE Mariko, 2015. "Identifying Competition Neutrality of SOEs in China," Discussion papers 15134, Research Institute of Economy, Trade and Industry (RIETI).
    10. Leheyda, Nina, 2008. "Market Power, Multimarket Contact and Pricing: Some Evidence from the US Automobile Market," ZEW Discussion Papers 08-118, ZEW - Leibniz Centre for European Economic Research.
    11. Pietro Tebaldi & Alexander Torgovitsky & Hanbin Yang, 2023. "Nonparametric Estimates of Demand in the California Health Insurance Exchange," Econometrica, Econometric Society, vol. 91(1), pages 107-146, January.
    12. Paris Cleanthous, 2011. "Evaluating Innovation and Moral Hazard in Pharmaceuticals," University of Cyprus Working Papers in Economics 03-2011, University of Cyprus Department of Economics.
    13. Susan Athey & Guido W. Imbens, 2007. "Discrete Choice Models With Multiple Unobserved Choice Characteristics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1159-1192, November.
    14. Panle Jia & Pinelopi K. Goldberg & Shubham Chaudhuri, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," American Economic Review, American Economic Association, vol. 96(5), pages 1477-1514, December.
    15. Mogens Fosgerau & Julien Monardo & André de Palma, 2024. "The Inverse Product Differentiation Logit Model," American Economic Journal: Microeconomics, American Economic Association, vol. 16(4), pages 329-370, November.
    16. Joao Macieira & Pedro Pereira & Joao Vareda, 2013. "Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play," Working Papers 13-15, NET Institute.
    17. Steven T. Berry & Philip A. Haile, 2014. "Identification in Differentiated Products Markets Using Market Level Data," Econometrica, Econometric Society, vol. 82, pages 1749-1797, September.
    18. Jorge Tovar, 2004. "The Welfare Effects Of Trade Liberalization: Evidence From The Car Industry In Colombia," Documentos CEDE 3638, Universidad de los Andes, Facultad de Economía, CEDE.
    19. Amit Gandhi & Jean-François Houde, 2019. "Measuring Substitution Patterns in Differentiated-Products Industries," NBER Working Papers 26375, National Bureau of Economic Research, Inc.
    20. Joo Yeon Sun, 2017. "Airline Deregulation and Its Impacts on Air Travel Demand and Airline Competition: Evidence from Korea," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(3), pages 343-380, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:50:y:2019:i:3:p:615-644. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.