Are Korean consumers willing to pay a tax for a mandatory BSE testing programme?

Abstract

The outbreaks of mad cow disease (BSE) have significantly increased the demand for food safety programs in the Korean beef market. Two issues that are getting much attention are about whether Korea should implement mandatory testing of slaughtered domestic cattle for BSE and whether consumers are willing to pay a tax for the programme. No study, however, has examined consumers’ willingness to pay (WTP) a tax for a BSE testing programme. We conducted a contingent valuation (CV) study using a double-bounded dichotomous choice approach to estimate Korean consumers’ valuation for a mandatory BSE testing programme on slaughtered domestic cattle that are 21 months or older. Our results show that the sample-population adjusted mean estimate of WTP a tax per year is 4482 KRW (US $4.01) per household. This suggests that Korean consumers have a strong preference for a mandatory testing of domestic cattle for BSE. This study also found that Korean consumers’ WTP for the programme is greater than estimated implementation costs of the programme. These results imply that implementing a mandatory BSE testing programme in Korea could confer positive consumer welfare.

Keywords:

• BSE testing programme
• contingent valuation
• double-bounded dichotomous choice
• welfare evaluation

JEL Classification:

• H200
• Q180
• Q13

Acknowledgement

The authors thank the editor and anonymous reviewers for their helpful comments.

Notes

¹ Our survey was conducted in October 2012. Japan’s Food Safety Commission has raised the age requirement for testing slaughter cattle for BSE from 21 months to 30 months in April 2013.

² To come up with bid values used in the double-bounded dichotomous choice questions, we conducted a pilot survey where we used an open-ended question. Specifically, the respondents who participated in the pilot survey were asked the following question: ‘If the Korean government proposes a program that will make it mandatory to test slaughtered domestic cattle that are 21 months or older for BSE, how much would you pay each year for this in taxes?’ We then based the bid values we used in the double-bounded dichotomous choice questions from responses to this open-ended question in the pilot survey (which had a mean WTP a tax of 5750 and SD of 1708).

³ We outsourced the survey to a research service agency, Macromillembrain (http://www.embrain.com).

⁴ We used USD KWR rate for 7 June 2013 (1: 1119).

⁵ The Korea Census conducted every 5 years and 2010 Korea Census is the latest version.

⁶ Figure 1 is just for illustration, we only used the estimated WTP from RPM as an example.

Additional information

Funding

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government [NRF-2014S1A3A2044459].