Public policy and private incentives for livestock disease control

Abstract

The widely recognized externalities associated with livestock disease control have prompted countries throughout the world to invest in centralized control schemes designed to lower disease prevalence. As disease levels drop and fiscal deficits climb, however, many governments are beginning to reconsider the design and delivery of their animal health services (Umali, et al., 1994). The Animal Health Board in New Zealand, for example, is concerned that the regulatory policies implemented to encourage participation in the national bovine tuberculosis control scheme have distorted market signals and removed some of the private incentive to control disease. Consistent with the ongoing shift to a more market oriented economy, the Animal Health Board is attempting to identify and implement policies which encourage producer participation, yet convey more accurately the cost of disease (AHB, 1995). The success of the Animal Health Board’s efforts to motivate cost effective disease control depends critically on whether their new policies generate consistent rather than opposing incentives for individual livestock producers to ontrol disease. Much of the previous literature on animal health economics, however, consists of ex post evaluations of national control schemes which offer limited insight as to the potential behavioural responses of producers who raise livestock primarily for economic profit (Dietrich, et al., 1987; Ebel, et al., 1992; Liu, 1979). This paper utilizes recent advances in the dynamic bioeconomic literature to develop a behavioral model of livestock disease control. The model is estimated and solved for a region in New Zealand where efforts to control bovine tuberculosis have been complicated by the existence of an effective wildlife reservoir for disease. The model is unique in its integration of disease dynamics, inter-species interaction, control-induced migration, and individual optimizing behaviour into one, unifying optimal control model.