Structural demand estimation of the response to food safety regulations in the Japanese poultry market

Abstract

Since their implementation in 1995, the agreements on the application of sanitary and phytosanitary measures and technical barriers to trade of the world trade organization have played an increasingly important role in the conduct of international negotiations. This study employs the method of moments estimator proposed by Berry et al. (RAND J Econ 25:242–262, 1995) and Nevo (Econometrica 69(2):513–548, 2001) to estimate the effect of Japanese pesticide residue standards on poultry consumption with a particular focus on the maximum residue limits (MRLs) on pesticide and veterinary drugs. The results confirm that more stringent MRLs on pesticide and veterinary drugs enhance the demand for poultry imports by ensuring higher food safety. The results shed light on Japanese consumers’ robust preference for food safety. The own- and cross-price elasticities further indicate the sensitivity of imported poultry meat to the change in domestic poultry price.