The costs and benefits of implementing a Hazard Analysis and Critical Control Point (HACCP) regulatory program for meat and poultry are distributed throughout the economy. The costs of implementing HACCP are paid initially by food processors, while the benefits of controlling foodborne illness from meat and poultry are distributed initially to at-risk consumers. However, the ultimate impact of these costs and benefits extends well beyond the initial payers and beneficiaries. The costs and benefits of HACCP have economic ramifications that ultimately affect the level and distribution of economic activity in many different segments of the economy.

USDA's Economic Research Service estimates the benefits of the HACCP regulatory program over 25 years at $4.46 billion to $22.19 billion (1993 dollars). USDA's Food Safety and Inspection Service estimates the costs of HACCP over 25 years at $1.04 billion to $1.23 billion (1993 dollars). In order to trace the distributional impact of these benefits and costs, two Social Accounting Matrices (SAM's) are developed: one that incorporates the benefits of reducing foodborne illnesses and one that incorporates the cost of implementing HACCP. The SAM framework is used to examine the impact that the HACCP program has on the level and distribution of consumption, production, and income throughout the economy.

The SAM analysis reveals the ultimate economic impact of the benefits and costs of HACCP and highlights the qualitative differences in the mechanisms by which these amounts impact on the economy. It is shown that the economic impact of human capital costs differs fundamentally from the impact of defensive expenditures. On the benefit side, the SAM experiments indicate that every dollar of income saved by preventing a premature death from foodborne illness results in an economy-wide income gain of $1.92, every dollar of household income saved by reduced medical expenses results in an economy-wide income loss of $0.40, and every dollar of private and public insurance expenses saved by reduced medical expenses results in an economy-wide income loss of $0.32. On the cost side, the SAM experiments indicate that every dollar spent on HACCP results in an economy-wide income gain of $0.66. The net economic impact of the costs and benefits of HACCP is an increase in production output of $7.0 billion, an increase in factor payments of $5.6 billion, and an increase in household income of $9.05 billion (1993 dollars). These net benefits would be larger if the benefits of reduced work-loss days were included.

The SAM accounting of the final impact of costs and benefits of HACCP provides useful information for policy makers by indicating the direction and magnitude of the economic flows resulting from regulation costs and reductions in foodborne illness. The SAM extends the initial cost-benefit analysis to account for the full economic impact on producers and consumers. Such an accounting indicates who ultimately benefits from improved health outcomes and who ultimately pays the costs of food safety regulation. The SAM experiments indicate that the ultimate distribution of the costs and benefits of HACCP differs substantially from the initial distribution. Use of the SAM framework also focuses attention on the difficulty of assessing the economic value of health.

¹Elise H. Golan, Katherine L. Ralston, and Stephen J. Vogel are economists and Paul D. Frenzen is a demographer with the Food and Rural Economics Division of the Economic Research Service, USDA. 1800 M. Street, NW, Washington, DC 20036-5831. E-mail:egolan@econ.ag.gov.

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