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1 Introduction

Every year in the United States foodborne diseases cause thousands of premature deaths and cost
society billions of dollars (USDA, 2000). Sporadic outbreaks of food contamination are the subject
of public attention and may adversely affect consumer demand for the implicated food products.
Although foodborne pathogens have been found in a myriad of food types, meat products remain
a major source. It is of considerable importance not only to academics but also to the food
industry and public policy-makers whether food safety information has short- and long-run effects
on consumer demand. The purpose of this paper is to empirically investigate, using a demand
system with rational habit persistence, the effects of meat recalls and news media coverage of food
contamination outbreaks on U.S. consumption of beef, pork and poultry products.

A small but growing economic literature examines the impact of food safety events on con-
sumer demand. Burton and Young (1996) built indices of media coverage of bovine spongiform
encephalopathy (BSE) by counting the number of newspaper articles that mentioned BSE. When
these indices were incorporated in a demand system, statistically significant impacts of BSE arti-
cles on beef and other meats were detected. Henson and Mazzocchi (2002) examined security price
data of a number of food manufacturers that were publicly traded on the London Stock Exchange.
Their results indicated that the public announcement of a possible link between BSE and a new
variant of its human equivalent Creutzfeldt-Jacob disease (CJD) by the British government in 1996
negatively affected beef product manufacturers but profited manufacturers of other meats. Similar
results were reported using U.S. data. Thomsen and McKenzie (2001) found that a class 1 meat
recall resulted in a 1.5-3% loss in shareholder wealth, while less serious hazards had no discernible
adverse impact on stock market returns of the implicated food company.

Several studies show that the effects of food safety on U.S. meat demand have been small
in magnitude relative to price and health effects. Dahlgran and Fairchild (2002) constructed an
adverse publicity index of salmonella contamination of chicken using multiple sources of TV and
print news. Their results indicated that consumer response to chicken contamination publicity was
small and short-lived with less than 1% reduction in consumption at the height of the exposure.
Flake and Patterson (1999) studied the impact of beef safety information on meat demand in a
system of demand framework. Their food safety information index was based on the number of
Associated Press articles on Escherichia coli (E. coli), salmonellosis and BSE. They found that



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