Price Response to Government Disclosure of Food Safety Information in Developing Markets

This study investigates the impact of government disclosure of food safety information on market outcomes in a real and developing market setting. Prior research either relied on data from developed countries, or hypothetical and laboratory experiments to examine market responsiveness to food safety information. Using a panel dataset of weekly pork wholesale prices and pork sampling test result variables at the city level, we find lagged and negative price responses to government quality information disclosure in the Chinese pork wholesale markets. Average pork wholesale prices began to decrease by 5% two weeks after the information disclosure. The negative information effects on pork prices are largely driven by negative pork demand shocks in particular in the main pork consumption cities, and are more evident in the treated cities with higher internet penetration rates, incidence of foodborne illness, and food safety regulatory resources. Results of this study contribute to a better understanding of the nationwide information-based food quality regulation, and importantly, inform the efficacy of public information interventions that tackle food safety issues in other developing countries.