Market power and food safety in the China pork industry

Abstract

Using data collected from a pork firm survey, we develop a modeling framework and use the conjectural variation method to examine the effect of market power on the food safety of the pork industry in China. Probit models with a two-step Heckman selection procedure are applied to identify the determinants of the likelihood and degree of food safety violations. Market power is found to reduce the likelihood of violation but not the degree of violation. Other factors such as traceability systems, adoption of risk control systems and industry standards, and the scale and scope of operations also impact food safety violations. Findings suggest that market power in China’s pork industry provides incentives for firms to mitigate risk and improve food safety. However, firms may continue to have challenges in meeting food safety obligations when moving toward mega-size and product diversification.