Valuing Product Innovation : Genetically Engineered Varieties in U.S. Corn and Soybeans

We develop a discrete-choice model of differentiated products for U.S. corn and soybean seed demand to study the welfare impact of genetically engineered (GE) crop varieties. Using a unique dataset spanning the period 1996-2011, we find that the welfare impact of the GE innovation is significant. In the last five years of the period analyzed, our preferred counterfactual indicates that total surplus due to GE traits was $5.18 billion per year, with seed manufacturers appropriating 56% of this surplus. The seed industry obtained more surplus from GE corn, whereas farmers received more surplus from GE soybeans