The Impact of HPAI Outbreaks on Revenue and Wealth: An Analytical Framework

Abstract

The aim of this paper is to present a simple economic model which can be applied to available secondary data (e.g., data from Living Standards Measurement Study (LSMS) surveys of the project countries) in order to investigate the impact of HPAI outbreaks on two welfare indicators of poultry producers. These indicators are revenue from poultry sales, as a measure of household livelihoods, and poultry asset value, as a measure of wealth from livestock (i.e., poultry) and/or potential future revenue. In this simple framework, the impact of HPAI on poultry producers' revenue is assumed to stem from two causes: (i) changes in the price of poultry due to the loss of poultry as a result of HPAI, as well as due to other supply side and demand side shocks, and (ii) losses in poultry stock due to HPAI outbreaks both as a result of poultry death due to infection and loss in poultry due to government control policies, e.g., culling. To this end, a simple theoretical model of poultry farmer and poultry market is developed to estimate the impact of HPAI outbreaks on market prices and poultry farmers' revenue and wealth. A simple demonstration of the model is presented for Indonesia by using demand and supply elasticities estimated by previous studies, as well as demand and supply shocks reported in the other case study countries of this Project. Finally, data required to apply this methodological framework and secondary data sources that can be used to estimate the parameters of the model are discussed