Evaluating Large Exogenous Shocks Using an Almost Nonlinear Equilibrium Displacement Model: Food Safety Regulations and Leafy Greens Production

Abstract The Food and Drug Administration (FDA) recently published a final rule regarding preharvest irrigation requirements for leafy greens production. We use an equilibrium displacement model (EDM) to quantify the effects of this policy. The model is modified to allow for nonlinear equilibrium trajectories. The results show that the FDA rule will cause North American leafy greens production to decline by 0.99% and farmgate prices to increase by 0.59%. A proposal to increase land buffer areas around confined animal feeding operations (CAFOs) and large composting sites would further increase leafy greens prices and reduce consumption.