ABSTRACT
This chapter analyzes the problem of food quality and bovinem somatotropin (BST) in terms of market failure. It discusses the special case of BST and explores the impact of BST regulation on social welfare. The chapter describes the implications of BST regulation for international agricultural trade and policy in light of our theoretical analysis. The public and political debate on BST for commercial use in dairy production suggests that BST use will become subject to some form of government regulation. The potential adoption and use of BST has stirred considerable public debate. Animal rights groups criticized BST use as incompatible with their basic principles; and environmental groups objected to BST because of their fear that it would lead to a growing concentration of animal production. Consumer aversion to BST milk tends to grow with increasing income; while the reduction in marginal cost of milk production is higher the larger is herd size and the higher the human capital input.
