Modeling heterogeneity in consumer preferences for select food safety attributes in China
Research highlights
► We conducted a nation-wide choice experiment to assess consumer preference for food safety attributes in urban China. ► We model heterogeneity in consumer preferences using a random parameters logit and latent class model. ► We find that consumers value direct government involvement in the food safety system more over other options.
Introduction
Throughout much of the second half of the last century, China’s centrally planned, autarkic economy made it an insignificant player in the global trading system. Today, having gone from a sleeping giant to the fastest growing economy in the world, China is considered the poster-child for economic growth. Many economists have called China’s emergence a “positive economic shock,” unleashing a consumer base and workforce of nearly 1.3 billion people into the global market. However, China’s rapid growth and development has not occurred without setbacks and challenges. A series of globally recognized food safety scandals have brought increased awareness to China’s inefficient food certification and inspection system. As a result, China’s role in the world export market has suffered as various countries have rejected a significant portion of its food exports for failing to meet rigorous food safety standards. Moreover, heighted public concern over the safety of China’s food supply has raised questions regarding consumer confidence in the existing government-run food inspection system.
Many of China’s food safety problems can be traced back to the farm level, as some farmers still rely heavily on the use of highly toxic pesticides to cope with various production problems (Calvin et al., 2006). The use of antibiotics in the livestock sector has also led to a series of public health concerns focused upon the rise of new antibiotic-resistant bacteria strains. China’s highly fragmented food supply chain composed of millions of small farmers, traders, and retailers, many of which operate unsupervised, poses a great challenge to the implementation of a comprehensive and effective domestic food safety system.
In an effort to keep the food supply of the world’s second largest economy safe, China’s government has approved a series of tougher food safety laws and regulations (Ramzy, 2009). Although publicized as a tough approach to remedying food safety concerns, it is unclear whether this latest effort will make China’s food safer and improve the country’s image to its agricultural trading partners. While much attention has focused on the problems plaguing China’s food quality and inspection system, little research has been dedicated to analyzing Chinese consumers’ concerns over food safety and their preferences for various food safety assurance programs.
Food safety issues often arise from problems of asymmetric information between consumers and producers of food with regards to product-specific attributes or characteristics. Third-party certification and traceability networks are examples of systems used to help bridge the information gap between market players and reduce inefficiencies that arise from asymmetric information. In China, an additional challenge lies in the inherent structure of the governing bodies which oversee food safety and quality. Unlike many developed countries, China’s food safety is regulated by several government entities with different and sometimes overlapping responsibilities (Calvin et al., 2006). As a result, consumers do not have a comprehensive food safety and quality system on which to base their purchasing decisions.
An assessment of Chinese consumer preferences for food safety informational attributes will aid policy makers in drafting and implementing more effective food safety regulations, restoring consumer confidence and reinstating China as a leading exporter of safe food products worldwide. In this study, a choice experiment approach is used to estimate urban Chinese consumers’ willingness-to-pay (WTP) for select food safety attributes in pork. Specifically, we evaluate a product traceability system, the current government-run certification program, a proposed third-party (non government-controlled) certification program and a product-specific information label.
Although news coverage of the recent food safety incidents in China has broadened our understanding of the issues plaguing China’s domestic food supply, research that analyzes the current situation from a consumer perspective is in its infant stage (see Brown et al., 2002; Wang et al., 2008). Research that analyzes consumers’ attitudes and perceptions toward the current government-controlled food safety assurance system and other such programs in China are missing from the economic literature. Due to the delicate intricacies of conducting an economic evaluation of such programs in China, most of the literature available on consumer food safety research focuses on other foreign consumers. Recently, Ubilava and Foster (2009) conducted a consumer study in the Republic of Georgia to measure consumer preference for informational attributes that will aid producers better manage their supply decisions in the midst of post-war reconstruction. Hayes et al. (1995) valued food safety of US consumers using an experimental auction markets approach that incorporated food safety risk levels. For a detailed documentation of food safety research, we refer readers to Grunert (2005).
While the use of choice experiments to study consumer preferences has increased in recent years (Ouma et al., 2007, Nilsson et al., 2006, Tonsor et al., 2009, Olynk et al., 2010), little use of this approach has been applied to study the Chinese consumer. The objective of this research is to assess urban Chinese consumer preferences for select food safety information attributes. Specifically, we use a choice experiment approach, examine preference heterogeneity using a random parameters logit (RPL) and latent class model (LCM), and take into account consumer’s food safety risk perceptions as assessed through survey analysis.
Section snippets
Theoretical framework and econometric modeling
The theoretical framework of this research is rooted in the Lancastrian approach to consumer theory. A break from the traditional view that utility is derived from a good, Lancaster proposed that a good per se does not give utility to the consumer. Rather, a good possesses characteristics, and these characteristics give rise to utility. Furthermore, Lancaster generalized that goods can posses multiple characteristics which can be shared by multiple goods and that goods in aggregate can possess
Heterogeneity in consumer preferences
Table 3 contains the results from the estimated utility functions. Coefficients from the RPL model indicate that, overall, consumers consider both the current government certification program and a private non-government certification program to be valuable, and substitutable (significant negative value on the cross terms between government and private certification). While a traceability system or a product information label do not increase consumers’ utility significantly when provided alone,
Implications and conclusion
In this study, we use a choice experiment to analyze Chinese consumer preferences for food safety information. Our results show that Chinese consumers are concerned about the safety of the pork they purchase and are willing to pay a positive amount to assure that their food is safe. The high level of concern regarding the safety of the pork supply can be linked to recent food safety incidents involving pork and dairy products, most notably the clenbuterol contaminated pork and melamine-tainted
Acknowledgements
This research is based upon work supported by the US National Science Foundation under Grant No. 0912174 and the Chinese Natural Science Foundation under Grant No. 70673102. Any opinions, findings, and conclusions or recommendations expressed in this document are those of the authors and do not necessarily reflect the views of the US National Science Foundation or the Chinese Natural Science Foundation.
The authors would like to thank two anonymous reviewers, whose comments significantly
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