Abstract

This paper develops a spatial equilibrium model suitable to analyze the economic impacts of measures (such as isolation distances and buffer zones) meant to ensure coexistence between GM and non-GM crops. We show that policies that put the cost of such measures exclusively on GM producers lead to a competitive equilibrium that is biased against GM products (relative to the welfare maximizing allocation). Efficient allocation is restored if the cost of implementing coexistence measures is shared equally between adjacent GM and non-GM farms.

Key Words: Biotechnology; externality; nonconvexity; regulation; technology adoption.