analysis on the impacts of animal disease outbreaks is the subject of many studies. Previous research has been conducted for a wide range of issues using a number of methods. The research objectives include examining the business loss, welfare impacts and changes in risk (Pritchett et al. 2005). Benefits of complying with food safety regulations and costs of potential food safety risks are also examined (Crutchfield et al. 2005). The level of analysis ranges from producers to consumers at the local, regional, national, and even international levels (Pritchett et al. 2005). One of the challenges is to quantify the impacts of animal diseases rather than simply conceptually identifying those effects (Pritchett et al. 2005). The analysis of the impacts consists of the effects on welfare, trade, prices, and production among other measures. Studies have been
conducted at the levels of farm producers, meat processors, consumers, regions, nations and global levels. Various models have been used for this purpose.
As reviewed by Rich et al. (2005), methods used in animal heath related studies can be grouped into five categories. They are benefit-cost analysis, linear and
mathematical programming models, partial equilibrium analysis (single-sector and multi-market models), input-output/social accounting models, and computable general equilibrium models. Each approach has its advantages and disadvantages. Rich et al. (2005) indicates that the selection of approach depends on the objective, data availability,
information desired, scale of analysis, considerations in time, space, and risk analysis needs.
As reviewed by Pritchett et al. (2005), the most often used methods for studying the impacts of animal disease outbreak include the input-output model (Caskie et al. 1999; Ekboir 1999), partial equilibrium model (Paarlberg and Lee 1998; Paarlberg et al. 2005; Roberts et al. 1999; Eenoo et al. 2000), simulation models (Jin et al. 2004), event studies (Thomsen and McKenzie 2001), and combinations of epidemiological and economic models (Mangen and Burrell 2003; Zhao et al. 2006).
3.3.1 Input-output model
Based on the links between beef sector and other sectors in the economy through input purchases and output sales, Caskie et al. (1999) use a regional input-output model to quantify the effects of the reduction in beef demand due to BSE on the economy of Northern Ireland with the countervailing substitution effects in pork and poultry sectors considered. It was estimated to have an income loss of 0.5% of regional GDP and job losses of 0.6%, while the majority of the income and job losses were in the beef sector. Ekboir (1999) estimates there would be losses of about $13.5 billion if there were an FMD outbreak in California.
Input-output model has obvious limitations, including (a) it only produces economic effects at the regional level; (b) the quantification relies on the multipliers in the model; and (c) it also assumes fixed prices and that the economy produces under a short term disruption in the same manner as it does from year to year (Pritchett et al. 2005).
3.3.2 Partial equilibrium model
Partial equilibrium models are often used to investigate welfare effects. Paarlberg et al. (2005) use such an approach to estimate the revenue impact and welfare changes. They decompose welfare of both producers and consumers into two categories: Producers in and out of disease regions and consumers who switch or do not switch consumption shares. For the producers, those in the affected regions suffer from sales loss while the producers in the disease-free regions face higher prices and gain surplus. For the consumers, those who switch from consuming red meat realize a welfare loss while those who are not concerned about meat safety gain from the lower meat price (Paarlberg et al. 2005).
A number of other studies have used partial equilibrium models. Paarlberg and Lee (1988) use a partial equilibrium model of beef trade to determine the optimal tariff level given the risk of importing infected products. Roberts et al. (1999) analyze trade and welfare effects of technical barriers. James and Anderson (1998) examine the Australian ban on imported bananas via a partial equilibrium model, finding that the gains to consumers may outweigh the losses to the domestic producers from removing the ban on the imports. They show that more assessment of quarantine policies is needed for animal disease risks considerations such as welfare gains and losses from importing risky commodities.
3.3.3 Simulation model
Simulation models allow the stochastic nature of market prices for final product and inputs to be incorporated such that a more realistic picture for business owners and
managers for better decision making is provided. Jin, Skripnitchenko and Koo (2004) use such a model to study the scenarios of BSE outbreaks in the U.S. and estimate the effects. The scenarios in their study include the magnitudes in demand decrease (5% to 20%) and beef export reduction (50% to 100%).
3.3.4 Event study
McKenzie and Thomsen (2001) study the impact of recalls of E. Coli on wholesale and farm beef prices using an event study. They find that beef recalls decreased beef prices and public traded food companies suffered from significant shareholder losses in the event of series food safety hazards.
3.3.5 Combination of epidemiological and economic models
Though difficult, and requiring more cross-disciplinary efforts, attempts have been made to integrate economic and epidemiological models. Disease epidemiology has been gradually used in economics. In the study by Mangen and Burrell (2003), they use a five-part modeling framework which includes a spatial, dynamic, stochastic,
epidemiological component implemented at the farm level to simulate the impacts of classical swine fever (CSF) outbreaks in the Netherlands.
3.4 New research areas mentioned in literature