My model projects the economic effects of Prop 12 on the North American hog/pork supply chain. It incorporates the vertical supply chain of representing farms, intermediaries, and consumers. The equilibrium is derived in the vertical market without regulations, which is then compared to the equilibrium after I incorporate the local jurisdiction limit on sale of pork products determined farm sow housing practices. The model includes two regions – inside and outside California – and three sets of agents along the supply chain – hogs farms, processors and marketers, and consumers in and outside California. Quantitative simulations calibrated on recent market characteristics and response parameters from the literature show that: compliant farrowing operations incur higher costs ; compliant processing and distribution operations incur higher costs ; covered pork products have higher retail prices in the regulated jurisdiction ; impacts on consumers outside the regulated jurisdiction and for the unregulated pork products are minimal, with higher prices, California consumers of uncooked pork cuts have substantial welfare losses , and producer surplus impacts are small because consumers in the regulated jurisdiction pay higher prices that cover compliance costs. Results are robust to reasonable ranges of response parameters. The major hog requirement of Prop 12 is that farrowing operations for which the meat from pigs is destined for California must provide group housing with more than the normal amount of space for sows.
Operations that already use group housing have a compliance cost advantage over those that use stall housing. Although California demands pork from less than 10% of North American hogs and 30% of sows in North America are already in group housing, a sufficient share of pork products is available to be diverted to California under Prop 12. However, because the space per sow in the California-compliant group housing was higher than the North American standard, commercial cannabis growers there remained significant costs of compliance at pig farrowing farms. Prop 12 and, more broadly, regulations imposed at a local point of purchase are unlikely to be economically efficient ways to farm practices because they raise costs all along the supply chain as well as at the farm. To highlight the importance of this point, I evaluate an alternative policy under which California would directly subsidize farms to change their housing practices to meet Prop 12 housing standards. The analysis shows that, for the same cost to California residents, the alternative policy would cause more than twice as many sows to be housed in ways that meet California’s standards than would under the Prop 12 regulations of California retail market standards. To explore willingness to pay for product attributes linked to two sets of carrot production practices, organic and fresh cut, I conducted a series of large on-line surveys of U.S. carrot buyers. Starting in December 2019, I asked on-line respondents about their willingness to pay for carrot packages of different attributes in 7 rounds of surveys over about 15 months until March 2021. In all more than 300,000 respondents provided data for my econometric estimation. Respondents face one of two types of survey questions.
The first type of question showed survey respondents a picture of a carrot package and asked which WTP interval represented the most they would be willing to pay for the displayed package. My analysis compared WTP responses from groups that saw packages displaying different attributes. In the other question framework, respondents were shown pictures of two packages side by-side that differed by a single attribute , each with a stated price. Respondents were asked which of the two packages they would be willing to buy at the state price for each. The results of this part of my dissertation are of two types: substantiative about willingness to pay for carrot attributes, and methodological about survey procedures. Main substantiative empirical findings are: Based on the questions for which respondents were shown side-by-side pictures of alternative packages, the median WTP for the organic attribute is estimated to be between $0.19 to $0.23 per pound . Based on the questions for which respondents were shown side-by-side pictures of alternative packages, the median WTP for the fresh cut attribute is estimated to be between $0.47 to $0.56 per pound . Willingness to pay results from the question when respondents faced a single picture of carrot package indicate a large response to price, suggesting that many respondents had a “baseline” market price for carrots in mind. However, this framework was less successful in eliciting differential willingness to pay for attributes in comparison with carrot packages that were not displayed.
Given the large sample sizes, parameters are precisely estimated, and differ little in response to large economic, supply chain, and social disruption over periods before and during the pandemic. Overall, the research demonstrated that reasonable and useful willingness to pay information can be gathered from cost-effective surveys . I documented stability of parameter estimates over time and found that showing respondents displays of relevant comparisons may be particularly important in framing the question.The first part of the dissertation, dealing with the California Prop 12 regulations of hog and pork regulations, makes three main contributions. The first contribution is to show how economic implications of consumer regulations that apply in a limited jurisdiction have implications for producers that depend on their cost of compliance, and for consumers that depend on whether they are within the jurisdiction of the product regulations. The second contribution is to evaluate how such consumer product regulations that apply in local jurisdictions likely create incentives for only the producers already close to compliance to change their practices. This reduces the costs of the farm practice shifts, but also means that relatively little change occurs in farm practices. The third contribution is to show that consumer product regulations tied to upstream production practices are especially costly ways to achieve changes in farm practices because they impose significant cost on processing and marketing services because of the need for segregation, certification, and traceability. The second part of the dissertation, on consumer demand for carrot attributes, makes several broad contributions. First, although carrots are a widely consumed, staple vegetable in the American diet, very little economic research has been devoted to carrot demand broadly or on demand for organic and fresh cut attributes. My dissertation research begins to fill this lacuna. Second, I find that WTP parameter estimates were constant over periods of massive economic, supply chain, and social dislocation. Third, I show reliable and robust ways to elicit useful estimates from a large and cost-effective online survey. My sampling approach and my empirical procedures offer guidance to empirical research on consumer demand.Foie gras is a food product made of the liver of a duck or goose. Although foie gras can be produced using natural feeding, foie gras production is usually conducted by force-feeding. Force-feeding, growing racks often called gavage, is feeding a duck or goose with more food than they voluntarily eat, fatting the liver. Animal rights activist groups, including the Humane Society of the United States, claim that force-feeding is inhumane treatment of animals . Several countries attempted to prohibit force-feeding practices in production within their jurisdictions. For example, the Israeli Supreme Court ordered the Israeli Ministry of Agriculture to prohibit geese force-feeding to produce foie gras in 2003 . The United Kingdom banned foie gras production under the Animal Welfare Act 2006. However, these examples do not restrict selling foie gras products sold within the regulating jurisdiction. This subsection provides three examples of banning foie gras products sold within the regulating jurisdiction.In 2004, California passed Senate Bill 1520, which changed the California Health and Safety Code. Section 25981 prohibits force-feeding in foie gras production: “a person may not force feed a bird for the purpose of enlarging the bird’s liver beyond normal size” . Section 25982 prohibits selling foie gras products in California: “a product may not be sold in California if it is the result of force feeding a bird for the purpose of enlarging the bird’s liver beyond normal size” . Farms had a seven and one-half year period to modify their production practices. The regulations were implemented on July 1, 2012.
To overturn the foie gras ban, in 2015, the California attorney general appealed to the Ninth Circuit. However, in 2017, the District Court favored the ban, and the law was upheld .In 2006, the Chicago City Council passed an ordinance banning foie gras, City Ordinance PO- 05-1895. The ordinance prohibited selling foie gras in all food dispensing establishments in Chicago. Food dispensing establishments were defined as “any fixed location where food or drink is routinely prepared and served or provided for the public for consumption on or off the premises with or without charges.” The ordinance became operative on August 22, 2006. Soon after the ordinance was passed, the city was sued by the Illinois Restaurant Association and a local Chicago restaurant in the state court, claiming that the ordinance violated the Illinois constitution. However, in 2007, the district court concluded that the ordinance did not violate the Illinois Constitution or the United States Constitution. However, after lobbying by restaurant owners, in 2008, the Chicago City Council repealed the foie gras ban.In November 2019, the mayor of New York City signed the bill banning the sale of force-fed poultry products. The New York City Council introduced the bill in January same year. After a series of hearings and amendments, the council approved the bill in October 2019. The bill is scheduled to take effect three years after it was enacted in November 2022. The new law prohibits selling force-fed poultry products, stated as follows: “No retail food establishment or food service establishment, or agent thereof, shall store, keep, maintain, offer for sale, or sell any force-fed product or food containing a force-fed product.” . According to the definitions in the law, retail food establishment includes supermarkets, grocery stores, specialty food stores, and farmer’s markets. Also, food service establishment includes any type of food service providers, stated as follows: “a place where food is provided for individual portion service directly to the consumer whether such food is provided free of charge or sold, and whether consumption occurs on or off the premises or is provided from a pushcart, stand or vehicle.” .Traditionally, fishers have used dolphins to harvest tuna. Because mature tuna swim below dolphins, fishers use dolphins to locate tuna schools. Drift netting was a widely used fishing practice to harvest tuna. The nets are drawn around located tuna schools, and the bottom of the net is tightened. Then, the fish are trapped inside and hauled onboard. Because dolphins swim above the tuna schools, drift netting catches those dolphins, which frequently kills those dolphins. In response to the reduced number of dolphins by drift netting, consumers boycotted canned tuna in the 1970s and 1980s . One type of consumer response was legislation. In Portland, Oregon, a group of consumers petitioned for an initiative to ban selling canned tuna caught by drift netting in 1990. However, their attempt did not result in legislation .Subnational jurisdictions, e.g., U.S. states and municipalities, increasingly impose farming practices regulations within their jurisdictions . Examples include restrictions on farm organizational structure, regulation of farming practices that cause pollution, setting of minimum wages and working conditions for farm labor, and limiting the use of inputs such as chemicals and fertilizers in crop production and hormones and antibiotics in livestock production . Although such regulations impact the cost of production and competitiveness of farms located within those jurisdictions, the products produced under these various regulatory regimes are eventually commingled in the supply chain without identity preservation and sold to consumers in integrated markets. Such regulations differ significantly in their economic impact from an emerging body of laws and regulations that control production practices for food products sold within the regulating jurisdiction regardless of where the products were produced . A key example is California’s Proposition 12 that was approved by voters in November 2018 and set to be implemented fully in January 2022. Prop 12 sets specific housing requirements for egg-laying hens, breeding pigs, and calves raised for veal and prohibits the sale in California of specified products derived from covered animals maintained in housing that does not meet these standards, regardless of where the covered animals were located. Other examples of such regulations are presented in the previous section.