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Compensation Payments and Animal Disease: Incentivising Farmers Both to Undertake Costly On-farm Biosecurity and to Comply with Disease Reporting Requirements

Listed author(s):
  • Fraser, Rob

This paper examines the issue of compensation payments for farmers affected by an animal disease outbreak. Recent literature has questioned the scope for the widely used “single mechanism” of compensation payments to incentivise farmers both to undertake costly on-farm biosecurity and to comply with disease reporting requirements. This paper develops a simple theoretical model of the farmer’s decision environment in this situation and uses a numerical analysis to illustrate both the potential for a range of levels of compensation payments to achieve this dual incentivising, and how this range is affected by changes in the parameter values of the farmer’s decision environment. Particular attention is given to the problem of spatial variation among farmers in the baseline of likelihood of a disease outbreak, and the findings of the paper are used to suggest a policy solution to this problem.

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File URL: http://purl.umn.edu/236359
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Paper provided by Agricultural Economics Society in its series 90th Annual Conference, April 4-6, 2016, Warwick University, Coventry, UK with number 236359.

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Date of creation: Apr 2016
Handle: RePEc:ags:aesc16:236359
Contact details of provider: Web page: http://www.aes.ac.uk/
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  1. Bicknell, Kathryn & Wilen, James E. & Howitt, Richard E., 1999. "Public policy and private incentives for livestock disease control," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(4), December.
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