A Welfare Analysis on GM Crop Market Structures and Existing Regulations

Abstract

Since their introduction in 1994, genetically modified (GM) crops have become a major sector of the agricultural industry in developing and developed countries. Despite this, many economic concerns have arisen regarding how governments regulate GM crops. These concerns have caused countries to ban GM crop usage, which has proven to be detrimental for national and international economies. This paper outlines the economic advantages of GM crop production and usage and surveys the current inefficiencies in the regulation of GM crops through a review on existing literature. It notes the increased farming efficiency, cost effectiveness, and rise in income for developing countries resulting from GM crop production and usage. It then considers why many of the listed potential benefits are unrealized, particularly due to the excessive market power given to GM seed producers, high barriers of entry into the GM market due to biosafety procedures, utility patents, and international trade asymmetries. Finally, the discussion section of the paper poses potential solutions by describing methods to efficiently regulate GM crops and suggesting possible areas of further research. The objective of this paper is to inform readers with minimal economic understanding of the potential economic benefits of GM crops and aid them in recognizing the optimal ways to regulate them.