• Environmental and Resource Economics Review
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• v.18 no.3
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• pp.495-521
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• 2009

This paper measures welfare losses from beef consumption reduction, which might be resulted from psychological anxiety about potential outbreak of BSE (commonly known as "bad cow dieses") risks after announcement of resuming US-beef imports in April of 2008. Unlike the previous literature of utilizing the contingent valuation method or experimental market approach, this study estimated quality-differentiated consumer demand functions using the information of self-reported beef consumption quantity, individually constructed price indices of beef, and subjective perception of BSE risks. The empirical results based on a survey sample of 360 residents in Jeon Ju city were consistent with the anticipation from economic theory, in terms of coefficients of own prices, substitute prices and income variables. The announcement of resuming US-beef imports did not make significant differences in the sign and sizes of the main economic variables. However, the subjective perception variable about BSE risks had negative significant impacts on beef demand functions after the announcement but not significant before the announcement. The welfare losses in a form of equivalent variation (EV) corresponding to the increases in concerns about BSE risks were measured to be about 30 thousand won per household.