Assessing the impact of regulated HACCP systems on the efficiency and profitability of United States meat processing and packing sectors

The purpose of this study is to develop an effective method to quantify implementation and operating costs associated with the mandatory Hazard Analysis of Critical Control Points (HACCP) regulation and analyze the impact of these costs on the efficiency and profitability of small firms in the meat packing and processing industry. The study uses a private, or firm specific, perspective to analyze the economic impact of HACCP as a food safety regulation. First, it develops a methodology that is used to quantify incentives of HACCP in the absence of output price incentives and second, it analyzes the impact of HACCP on efficiency and profitability from different perspectives.; The methodology developed consist of: flexible translog cost function, with a system of cost share equations, to evaluate the cost structures of different firm sizes and categories; Morishima, cross elasticities of substitution of HACCP for other inputs; adjusted ordinary least squares analysis, economies of size, biased technical change, and parametric variation of biases to analyze efficiency of firms with and without HACCP systems; a system of translog profit share equations to evaluate significant economic profit parameters; and a target MOTAD model to analyze profitability of small firms with HACCP in a risky framework. A questionnaire was used to collect primary data on input and output prices and quantities needed for the empirical models.; Major findings from the survey and the analysis reveal: (1) limited scope of HACCP implementation in the meat industry. Only 14.7% of the respondents have HACCP systems in place, (2) Small firms will incur an average of 2.5 cents per pound of amortized implementation and operating HACCP expenses, (3) The cost structures of all firm categories are non-homothetic. The non-homothetic cost function implies that the quadratic interaction terms between output and input prices are significant economic parameters that must be included in the estimated cost functions, (4) HACCP can reduce other input costs like labor and carcass used, (5) Firms with HACCP systems are more efficient than those without HACCP systems. Finns with HACCP enjoy 18--21% lower labor expenses than firms without HACCP systems. A target MOTAD analysis revealed that firms can realize positive profits with current diverse processes and products with slight variation of the scope of output. The hypothesis that mandatory HACCP systems may negatively affect small firms profitability is not confirmed in this study. HACCP will improve the efficiency of firms in the meat industry.