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

David A. Hennessy, Jutta Roosen () and Helen H. Jensen ()

Center for Agricultural and Rural Development (CARD) Publications from Center for Agricultural and Rural Development (CARD) at Iowa State University

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.

Keywords: feeder trade; industrialization; information; Nash equilibrium; vertical integration; welfare; food safety. (search for similar items in EconPapers)
JEL-codes: D62 H23 L22 (search for similar items in EconPapers)
Date: 2004-07
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Related works:
Journal Article: Infectious Disease, Productivity, and Scale in Open and Closed Animal Production Systems (2005) Downloads
Working Paper: Infectious Disease, Productivity, and Scale in Open and Closed Animal Production Systems (2004) Downloads
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