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The Economics of Genetically Modified Crops

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- Matin Qaim,  (<mqaim@uni-goettingen.de>) 

This article reviews the current state of knowledge on genetically modified (GM) crops from the field of economics. According to the article, the available impact studies show that insect-resistant and herbicide-tolerant GM crops are beneficial to farmers and consumers, producing large aggregate welfare gains as well as positive effects for the environment and human health. But, "widespread public reservations have led to a complex system of regulations."

"Future issues" identified by the article include that: 1) over-regulation has become "a real threat" for the further development and use of GM crops, and the costs in terms of foregone benefits may be large, especially for developing countries; 2) economics research has an important role to play in finding ways to maximize the net social benefits, with more work needed to quantify possible indirect effects of GM crops, including socioeconomic outcomes as well as environmental and health impacts; 3) economists need to contribute to designing efficient regulatory mechanisms and innovation systems; 4) although the gradual move from public to private crop-improvement research is a positive sign of better-functioning markets, certain institutional factors seem to be contributing to increasing industry concentration; and 5) especially with a view to small-scale farmers, more public research and institutional support are needed to complement private sector efforts.