Economic Considerations of Animal Welfare Policy

Animal welfare considerations are becoming increasingly important for producers of animal-derived agricultural products. Recent media attention on issues of housing conditions for intensively reared livestock and induced calving in dairy production make it clear that some members of the public feel strongly about the overall welfare of farm animals. In many cases, practices that are now perceived as welfare unfriendly are also associated with lower per-unit costs of production, creating a ‘classic’ economic trade-off between production and welfare objectives. In this paper a relatively simple partial equilibrium model is used to illustrate that the distributional impacts of animal welfare regulations (for both humans and animals) depend critically on whether the domestic market is open to international competition. A preliminary case study involving housing options for sows in New Zealand provides an empirical illustration of the possible magnitude of the costs of welfare enhancing policies in a small open economy when the country is a net importer. The fact that welfare enhancing policy is driven by consumers who do not share the resulting economic burden raises important philosophical questions about how society defines what is acceptable on welfare grounds, and whether there is any economic justification for mitigating the costs when they accrue only to one sector of the economy.