The impact of federal indemnification on livestock biosecurity

Abstract

This paper provided a theoretical framework for analyzing the relationship between federal indemnification and livestock biosecurity. Theoretical results show that the responsiveness of biosecurity to indemnity payments depends on a number of factors. First, the responsiveness of biosecurity will depend on the effectiveness of preventive measures in decreasing the growth in animal susceptibility. Second it was found that the responsiveness of disease abatement to changes in an indemnity was an increasing function of the marginal product of abatement. It was also found that abatement was a decreasing function of the rate at which the marginal product diminishes and that the proportion of damages indemnified has a direct affect on abatement. Lastly, it was shown that losses that extend beyond animals values may decrease the impact of indemnification on abatement levels and under certain conditions the level of biosecurity (with added losses)may exceed the no-indemnity optimal.livestock