Market and Welfare Effects of Mandatory Country-of-Origin Labeling in the US Specialty Crops Sector

This study provides a new framework of analysis of the market and welfare effects of mandatorycountry of origin labeling (MCOOL) for fruits and vegetables that accounts for heterogeneousconsumer preferences for domestic products, differences in producer agronomic characteristics,and retailer market power when buying and selling these products. The market and welfareeffects of MCOOL are shown to be case-specific and dependent on the labeling costs at the farmand retail levels, the strength of consumer preference for domestic products, the market power ofretailers, the marketing margin along the supply chain, and the relative costs of imported anddomestic products. Simulation results for the US markets of apples and tomatoes indicate that forthe regulation to increase total economic welfare in these markets, the consumer demand afterMCOOL would need to increase by 2.6% to 7.0% for domestic apples and by 8.2% to 22.4% fordomestic tomatoes, depending on the market power of retailers and the size of the labeling costs.