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

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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.

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Fig. 1

Source: Author’s calculation based on the Ministry of Agriculture, Forestry and Fisheries. Note: The share of “meat” equals to the sum of “beef”, “pork”, “chicken”, and “others”

Fig. 2

Source: Author’s calculation based on the MAFF

Fig. 3

Source: Author’s calculation based on Japan’s Agricultural and Livestock Industries Corporation and the Animal Quarantine Services of the MAFF

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Notes

  1. The yearly poultry consumption increased from 1974 thousand tons in 2006–2369 thousand tons in 2016, while the yearly consumption of pork and beef remain flat in the past 10 years. Source: http://www.maff.go.jp/j/chikusan/shokuniku/lin/attach/pdf/index-107.pdf.

  2. Typically, the “positive list” prohibits the distribution of foods whose pesticide residues exceed the standard regarding 799 kinds of agricultural chemicals and for other chemicals a uniform level of 0.01 ppm was applied to. Before the implementation of the “positive list” system, the concept of regulation was so-called “the negative list”, that is, there was no regulation on pesticide residues except the listed 250 pesticides and 33 veterinary medicines. As for this study, the MRL index used in the estimation is calculated using regulation data on the chemicals of the positive list, meaning that none has been applied to the uniform level MRL regulation. Source: http://www.mhlw.go.jp/topics/bukyoku/iyaku/syoku-anzen/zanryu2/dl/060516-1.pdf.

  3. http://www.maff.go.jp/aqs/hou/pdf/JP_Pultry20171027.pdf. Poultry import from the listed countries and regions is allowed when an inspection certificate issued by the government agency of the exporting country is provided.

  4. Berry et al. (1995) developed this model and employed it to investigate the market demand of US automobile industry.

  5. Carranza (2010) studied the effect of competition on product innovation in the digital cameras market. Li and Moul (2015) examined the impact of retail responsibility designations and vertical contracts on Chinese mobile phone market and Fan and Yang (2016) focused on the effect of price discrimination and competition on US smartphone industry.

  6. Nevo (2001) examined consumers’ reaction to the product with nearly collusive pricing behavior and intense nonprice competition by using the data of US ready-to-eat cereals market. Kiesel and Villas-Boas (2007) investigated consumer reactions to changes in information provision regarding organic milk. Both Bonnet and Réquillart (2013) and Liu et al. (2014) focused on the soft drink market, the former is about the impact evaluation of taxation and the latter is about policies aimed at curbing consumption of carbonated soft drinks.

  7. In this specification we draw a sample of 500 individuals.

  8. In this study, \(\varepsilon\) is defined as 10e–6.

  9. http://www.alic.go.jp/english/.

  10. http://www.maff.go.jp/aqs/english/.

  11. Similar to Japanese market, broiler is also the dominant kind consumed in the world’s market so that those explicit indicators such as nutritive value of poultry products from different origins is thought to be almost identical (though we don’t have the exact data).

  12. http://www.ffcr.or.jp/zaidan/ffcrhome.nsf/TrueMainE?OpenFrameSet.

  13. Due to the outbreak of avian influenza, poultry import from the US was banned in March 2003, followed by those from China and Thailand in January 2004. Typically, poultry meat with heat treatment can be imported, it was not a complete import ban.

  14. The world’s average price is assumed to be exogenous, although this assumption could be somewhat unreasonable because China and the US are one of the world’s largest poultry consumption market.

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Correspondence to Qizhong Yang.

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Yang, Q., Honda, K. & Otsuki, T. Structural demand estimation of the response to food safety regulations in the Japanese poultry market. Eurasian Bus Rev 9, 367–385 (2019). https://doi.org/10.1007/s40821-018-00117-2

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