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Abstract
This study provides a new framework of analysis of the market and welfare effects of mandatory
country of origin labeling (MCOOL) for fruits and vegetables that accounts for heterogeneous
consumer preferences for domestic products, differences in producer agronomic characteristics,
and retailer market power when buying and selling these products. The market and welfare
effects of MCOOL are shown to be case-specific and dependent on the labeling costs at the farm
and retail levels, the strength of consumer preference for domestic products, the market power of
retailers, the marketing margin along the supply chain, and the relative costs of imported and
domestic products. Simulation results for the US markets of apples and tomatoes indicate that for
the regulation to increase total economic welfare in these markets, the consumer demand after
MCOOL would need to increase by 2.6% to 7.0% for domestic apples and by 8.2% to 22.4% for
domestic tomatoes, depending on the market power of retailers and the size of the labeling costs.