An Ex post Evaluation of Economic Impacts of Foot-and-Mouth Disease on Taiwan Using a Dynamic Computable General Equilibrium Model

The outbreak of foot-and-mouth disease (FMD) in 1997 has resulted in significant losses to Taiwan's hog industry which was the most important industry in Taiwan's agricultural sector at that time. Hog farmers have suffered great losses due to the cost of slaughtering infected hogs and reduced revenues in the hog market. Furthermore, all pork exports are prohibited according to the Office International des Epizooties (OIE) regulation. There have been a number of ex ante studies that have quantified the potential impacts of FMD on Taiwan's economy (e.g., Tsai 1999, Lin and Hsu 1999). That is, the potential impact assessment was done when the event of FMD just broke out. This article provides an ex post economy-wide assessment of the FMD impacts on Taiwan. The model used is Taiwan General Equilibrium Model (TAIGEM-D), a dynamic, multi-sectoral computable general equilibrium (CGE) model of the Taiwan's economy, which is derived from the Australian ORANI model and the MONASH model (Dixon, Parmenter, Sutton and Vincent, 1982; Dixon and Rimmer, 2002). The input-output database was compiled from the 150-sector Use Table of the 1996 Taiwan's Input-Output Tables. To provide an ex post evaluation, we use historical closure and ex post closure (a closure similar to decomposition closure) originally from MONASH innovations. Comparisons with other ex ante FMD impact assessments are also provided. Results indicate that only a few industries like other livestock products and other processed food sectors would benefit from FMD, while almost all other industries in Taiwan suffered with output losses as well as employment and welfare reductions. Loss to gross domestic product (GDP) of Taiwan is estimated to be 0.28 percent which is much smaller than those predicted by the previous ex ante, partial equilibrium studies.