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Infectious Disease, Productivity, and Scale in Open and Closed Animal Production Systems

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Abstract

Comparative advantage motivates large trade flows in feeder animals throughout the world. Trade creates externalities when animal diseases can spread beyond the purchasing farm. When growers can choose between open and closed production systems, Nash equilibrium will likely involve socially excessive trading. Supply response to an increase in marginal costs may be positive. While first-best involves marketwide adoption of either an open-trade or closed-farm system, equilibrium may entail heterogeneous systems. If this is the case, then the feeder trade should be banned. Within a farm, we show how risk of infectious disease can create decreasing returns to scale when the technology is otherwise increasing in returns to scale. Control of disease risk through bilateral contracts or damage-control technologies will increase scale of production in fattening, while better sorting in feeder animal markets will have ambiguous effects on scale.

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  • David A. Hennessy & Jutta Roosen & Helen H. Jensen, 2004. "Infectious Disease, Productivity, and Scale in Open and Closed Animal Production Systems," Center for Agricultural and Rural Development (CARD) Publications 04-wp367, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:04-wp367
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    Cited by:

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    3. Hennessy, David A., 2012. "Economic Aspects of Agricultural and Food Biosecurity," Staff General Research Papers Archive 35015, Iowa State University, Department of Economics.
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    5. Chitchumnong, Piyayut & Horan, Richard D., 2015. "Multiple Choices, Strategic Interactions, and Market Effects in Livestock Disease Risk Management," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205778, Agricultural and Applied Economics Association.
    6. Laroche Dupraz, C. & Postolle, A., 2013. "Food sovereignty and agricultural trade policy commitments: How much leeway do West African nations have?," Food Policy, Elsevier, vol. 38(C), pages 115-125.
    7. Richard D. Horan & Eli P. Fenichel & David Finnoff & Carson Reeling, 2018. "A Portfolio-Balancing Approach to Natural Capital and Liabilities: Managing Livestock and Wildlife Diseases with Cross-Species Transmission," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(3), pages 673-689, July.
    8. Tong Wang & David A. Hennessy, 2015. "Strategic Interactions Among Private and Public Efforts When Preventing and Stamping Out a Highly Infectious Animal Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 435-451.
    9. Jarkko K. Niemi & Leena Sahlström & Jonna Kyyrö & Tapani Lyytikäinen & Alina Sinisalo, 2016. "Farm characteristics and perceptions regarding costs contribute to the adoption of biosecurity in Finnish pig and cattle farms," Review of Agricultural, Food and Environmental Studies, Springer, vol. 97(4), pages 215-223, December.
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    11. Rouvière, Elodie, 2016. "Small is beautiful: firm size, prevention and food safety," Food Policy, Elsevier, vol. 63(C), pages 12-22.
    12. Beard, Rodney, 2015. "Using a structural gravity model to assess the risk of livestock disease incursions in the UK," 150th Seminar, October 22-23, 2015, Edinburgh, Scotland 212668, European Association of Agricultural Economists.
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    14. Horan, Richard D. & Fenichel, Eli P. & Finnoff, David & Wolf, Christopher A., 2015. "Managing dynamic epidemiological risks through trade," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 192-207.

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    More about this item

    Keywords

    feeder trade; industrialization; information; Nash equilibrium; vertical integration; welfare; food safety.;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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