Economic Burden of Livestock Diseases: A Vertically Integrated Partial Equilibrium Livestock Model

ABSTRACT Animal health and livestock disease constrain food security, education, and the wealth of households. Assessment of the impacts of animal health and livestock diseases on the well‐being of the live animal and value chain actors, as well as consumers, helps to quantify the efficiency of resource allocations in the livestock sector and to improve stakeholder decision‐making. In this paper, we aim to illustrate how the impact of improved animal health affects the well‐being of economic agents of the livestock sector of an economy. We specify a vertically integrated partial equilibrium livestock model to identify disease free equilibria as a special case of the Kuhn–Tucker conditions. We provide empirical evidence from a case study on the small ruminant meat value chain of Ethiopia. We find that the total surplus increase for a disease free small ruminant sector is USD 780 million under constant consumer demand. If meat demand increases according to the FAO projection, the surplus gain increases to USD 1.2 billion. Overall, our results support that economic agents across the value chain benefit from improved livestock health.