A welfare analysis of country-of-origin labeling and alternative policy choices for beef

Country-of-origin labeling (COOL) for beef and certain other food products was a heavily-debated issue during the development of the Farm Security and Rural Investment Act of 2002. Rules to implement mandatory COOL were included in the final legislation, but in the years since, the debate has continued over the optimal policy for implementing COOL and the potential economic impacts on consumers and producers.; Recent literature has studied the potential costs of COOL, the potential consumer willingness to pay for COOL, and the potential welfare impacts of implementing mandatory COOL for beef. This study extends the previous work to consider the welfare impacts of each of three alternative COOL policies for beef: no COOL, mandatory COOL, and voluntary COOL.; This study builds an equilibrium displacement model and introduces a segmented consumer market and a segmented production sector to allow for the analysis of partial implementation of COOL as could happen under voluntary COOL rules. The analysis shows that introducing COOL can be beneficial to both consumers and producers. Mandatory COOL is welfare-improving over no COOL for both consumers and producers given cost and willingness-to-pay estimates as reported in recent literature. But, voluntary COOL is welfare-improving for both consumers and producers over mandatory COOL. Sensitivity analysis of these results shows that the relative preference of voluntary COOL over mandatory COOL and mandatory COOL over no COOL is consistent over a wide range of cost estimates, willingness-to-pay estimates, and supply and demand elasticity estimates.; The robustness of these results suggests a clear policy direction for the future of COOL, but the results also highlight the difficulty in achieving an optimal policy solution. Based on the results, producers benefit most under voluntary COOL, as do consumers in whole. But, the consumer sector is segmented and the segment of consumers that prefers COOL benefits most under mandatory COOL. The segment of consumers that has no preference for COOL benefits most under no COOL.