Landscape clubs: Co-existence of genetically modified and organic crops

Abstract

The possibility of increased production of genetically modified (GM) crops in agriculture accentuates the need to examine the feasibility of GM and non-GM technologies co-existing on a common physical landscape. Using the theory of clubs, this paper examines the possibility of co-existence for GM and organic wheat technologies through the formation of an organic club with an endogenously determined buffer zone. Given the available data on prices, and yields, it is shown that a club can be created in which GM and organic agricultural production technologies can economically co-exist in the same physical landscape. Specifically, co-existence results in an increase in economic welfare over a situation where only GM technology is used but is not Pareto superior because producers in the buffer zone will incur injury. We show that organic producers in the club can compensate producers in the buffer zone and still be better off. Hence, the compensation principle holds.