Welfare Measurement and Quality Product Differentiation in Agriculture: An Example from the EU 15 Beef Sector

This paper examines the impact of two different model specifications on welfare estimations. A model specification that takes into account product differentiation is compared to a specification where the product differentiation is overlooked. The welfare comparison under both specifications show ambiguous results: the welfare under one specification may be larger or lower than the welfare under the alternative assumption. In order to illustrate our theoretical conclusions, we present an application to the EU15 beef market. We show that the welfare when the product differentiation is taken into account by the econometric estimation is lower than the welfare when the product differentiation is overlooked.