CONSUMER WILLINGNESS-TO-PAY FOR GM FOOD PRODUCTS IN ITALY

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CONSUMER WILLINGNESS-TO-PAY FOR GM FOOD PRODUCTS IN ITALY
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   AgBioForum – Volume 3, Number 4 – 2000 – Pages 259-267  _________________________________________________ 1 Stefano Boccaletti and Daniele Moro are Associate Professors with the Istituto di Economia Agro-alimentare Università Cattolica, Piacenza, Italy. © 2000 AgBioForum. C ONSUMER W ILLINGNESS -T O -P AY F OR GM F OOD P RODUCTS I N I TALY   Stefano Boccaletti and Daniele Moro 1   This paper evaluates consumer willingness-to-pay (WTP) for food products obtained through the application of biotechnology using data collected from a consumer survey in Italy in 1999. Survey results show that consumers have a low degree of knowledge of the issue, but an overall positive attitude towards genetically modified (GM) foods. Estimation results of an ordered probit model suggest that WTP is mainly affected by income and information.  Key words : biotechnology; willingness-to-pay (WTP); food products; contingent valuation (CV). T he issue of consumer acceptance of biotechnology has been largely debated (see for example Thompson, 1996, 1998). It is commonly believed that European consumers have a negative attitude towards biotechnology; and, indeed, international comparisons of consumer acceptance have shown significant differences between European and North American (Hoban, 1997) countries, with a higher resistance recognized among European consumers. This argument has then been used by public authorities within Europe to justify their stance on GM foods, which has more recently been negative  —prohibiting their commercial introduction. In evaluating consumer acceptance the role of information is crucial. Information plays an even more important role for innovative products, as in the case of GM foods; surveys show that consumer awareness and understanding of biotechnology are still low (Hoban, 1997). Thus, the private and  public sectors’ provision of educational programs and information is a valuable strategy. The aim of this paper is to provide further insights to the debate; a consumer survey was conducted in Italy to evaluate the degree of awareness and knowledge, and attitudes towards GM food products; determinants of consumer response were analysed through contingent valuation methods. Survey Design And Sample Information was obtained through a phone survey conducted in 1999 on a sample of 384 people, randomly selected from the province of Piacenza in Northern-Italy; the co-operation rate was acceptable, with 200 questionnaires fully completed (52%). The main purpose of the survey was to measure the respondent’s awareness and willingness-to-pay for GM foods; and to collect the main explanatory variables, which, from other similar studies, are believed to affect individual purchasing  behavior.  S. Boccaletti & D. Moro – Consumer Willingness-To-Pay For GM Food Products In Italy   The questionnaire was organized into three sections. The first section was dedicated to understanding the degree of the respondent's knowledge about biotechnology and GM foods. In the second section, we asked for the respondent’s WTP for GM foods. Finally, the third section obtained information on the socio-demographic individual characteristics of each respondent. Tables 1, 2, and 3 provide summary statistics about sample characteristics and survey results. Table 1: Summary of Survey Results: Socio-demographic Characteristics ( N = 200). Variable Percentage (%) Variable Percentage (%) Sex: Monthly Household Income (INCOME) in Millions of Lire: Male Female 42 58 < 1.5 1.5 - 2.4 2.5 - 3.4 > 3.4 9 27 33 31 Age (AGE): Working Condition: < 20 years old 20 - 29 30 - 39 40 - 49 50 - 59 60 - 70 > 70 3.0 20.0 24.0 20.0 15.5 12.0 5.5 Unemployed Student Housewife Retired Blue collar White collar Other 2.0 9.0 18.5 12.5 6.0 37.0 5.0 Education (EDU): Household Size: Up to grade 5 Up to grade 8 High school University 10.0 28.5 47.0 14.5 1 person 2 persons 3 or more persons 8.0 68.0 24.0 Place of Residence: Usual Shopper: Urban (city centre) Urban (suburbs) Rural 28.5 39.5 32.0 Yes  No 66.5 33.5 Place of Purchase: Traditional outlets Multiple retail 12.5 87.5 The degree of knowledge about biotechnology and GM foods in the sample was low: 82.5% of the respondents in the sample rated their degree of knowledge as “insufficient.” A previous survey by Pedraglio (1998) indicated that only about 50% of the respondents interviewed knew what  S. Boccaletti & D. Moro – Consumer Willingness-To-Pay For GM Food Products In Italy    biotechnology was, but 20% of them declared knowledge of biotechnology only after the interviewer read a definition of it. Our results are therefore consistent with this earlier study. Table 2: Summary of Survey Results: Consumer Awareness ( N = 200). Variable Percentage (%) Heard about Biotechnology (HEARD): Yes  No 51.0 49.0 Aware of Buying GM Foods: Yes  No Don’t know 24.3 47.6 28.1 Believe that GM Products are Sold (SOLD): Yes  No Don’t know 51.5 10.5 38.0 Knowledge on Biotechnology (KNOW):  None Low Sufficient Good 38.0 44.5 13.5 4.0 Regarding the degree of awareness about biotechnology and GM foods, 51.5% of the respondents knew that GM food products were already present on the market. Compared with other surveys (Hoban, 1999) our sample showed a significantly higher degree of awareness. A somewhat surprising result was that 46% of the respondents rated their attitude towards GM foods as positive and only 27.5% rate their attitude as being negative. Over 24% of them were aware of  buying GM foods on the market. Nevertheless, information was perceived as an important issue— 94% of the respondents asked for a specific label in order to be able to recognize GM foods. The respondents based their response (either negative or positive) on health and environmental issues. Furthermore, 39.5% showed an indifference towards GM and traditional food products if quality and  prices were held the same, and another 22% said they would consume GM foods even if the price was slightly higher (5%). The rate of acceptance seemed to increase when consumers were confronted with specific products; we proposed 4 alternatives: products with a lower use of pesticides (LP); products with improved nutritional characteristics (N); products with improved organoleptic characteristics (O); and finally  products with a longer shelf-life (SL). While 17.5% would not buy “generic”   GM foods, this  percentage decreased to about 12% on average under the four alternatives.  S. Boccaletti & D. Moro – Consumer Willingness-To-Pay For GM Food Products In Italy   Table 3: Summary of Survey Results: Consumer Acceptance and WTP ( N = 200). Consumer Acceptance of Biotechnology Attitude: Percentage (%) Positive  Negative Indifferent 46.0 27.5 26.5  Would Like Labeling: Yes  No Don’t know   94.0 5.5 0.5  Price Difference with Respect to Regular Products (same quality): Don’t buy < 10% < 5% 17.5 11.5 4.0   Same price > 5% > 10% 39.5 22.0 5.5   Willingness-To-Pay (WTP) (Percentage) Lower Use of Pesticides Improved Nutritional Characteristics Improved Organoleptic Characteristics Longer Shelf-Life Do not buy < 5% 6 - 10% 11 - 15% 16 - 20% > 20% 11.0 30.5 35.5 10.5 4.0 8.5 12.0 26.0 35.5 12.5 6.5 7.5 12.0 34.5 29.0 13.5 5.0 6.0 12.0 52.0 21.0 9.0 3.0 3.0 Furthermore, among people that rated their degree of awareness as good, 87.5% were either positive (62.5%) or indifferent (25%) towards GM foods. Some kind of “information bias” could have affected the data for those respondents who indicated a negative attitude toward GM foods, as negativity increased for consumers with "no knowledge" to a "low level of knowledge," but then, when consumers collected more information the rate of acceptance increased.  S. Boccaletti & D. Moro – Consumer Willingness-To-Pay For GM Food Products In Italy   Model Specification A contingent valuation (CV) approach was used to evaluate the consumers’ response in the absence of a real purchasing situation. The CV approach allows a direct estimation of WTP by means of different (direct) elicitation techniques. Several concerns regarding its reliability have been raised (Buzby, Skees, & Ready, 1995; Fox et al. , 1995; Caswell, 1998). For example, consumers may take a theoretical scenario less seriously than a real one and, therefore, they may tend to bias their true WTP (Blumenshein et al.,  1998). Nevertheless, the selection of appropriate survey and elicitation methods can reduce and minimize these biases. We used a payment card elicitation method. First, we asked about the consumer WTP for generic GM products, allowing for negative WTP. Then, for the four specific alternative products, respondents were asked to choose among five classes of WTP: < 5%, 6 - 10%, 11 - 15%, 16 - 20%, and > 20%. This survey method should allow respondents to report their propensity to pay higher  prices for unfamiliar products. The empirical study was based on econometric techniques. The discrete structure of WTP implied the adoption of (multinomial) probit/logit like procedures. Moreover, given the ordinal ranking of the WTP dependent variable, the ordered version of probit estimation was applied (Greene, 1990). The LIMDEP econometric software was used for estimations. The economic literature indicates that WTP generally depends on socio-demographic factors, such as income, education, demographic characteristics, and place of residence. Moreover, specific studies on the acceptance of agricultural GM food products suggest that knowledge is also crucial (Caswell, Fuglie, & Klotz, 1994). All these factors will have an impact on the probabilities of choosing a  particular WTP range. Five different models were estimated, one for generic GM foods, which admitted negative WTP values, and the four product improvements considered—lower pesticide use, improved nutritional characteristics, longer shelf-life, and improved organoleptic characteristics. The proper set of independent variables for each model was selected by applying a stepwise procedure. Overall probabilities associated with the different WTP outcomes were calculated at the variables’ mean values using estimated intercept and coefficients. Model significance was verified by calculating the chi-square statistics resulting from the restricted and unrestricted log likelihood functions. Empirical Results After selection procedures, only three of the five models were statistically significant. Willingness-to-pay for products exhibiting a longer self-life and generic GM food products were not related to any of the available explanatory variables. For products exhibiting a longer shelf-life, a possible explanation could be that shelf-life is individually perceived to be a product characteristic which could be improved without resorting to biotechnology. The explanatory variables introduced in the estimated models are summarized in tables 1, 2, and 3 (abbreviations are showed in parentheses). The variable INCOME is monthly income; EDU denotes the education level of the respondent; KNOW is the respondent’s self evaluation of his or her degree of knowledge; HEARD considered if the respondent had ever heard of various biotechnologies; and SOLD considered if the respondent knew that GM products were currently sold on the market. Table 4 reports the three final models estimated.
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