The industrialization of animal agriculture has fundamentally transformed animal health markets while animal health innovations have promoted this industrialization. The subtlety of these interactions shows how little we know about agricultural industrialization. To illustrate, we consider three stylized features of industrialized animal agriculture. These are the closing off of production activities from external effects, emphasis on control, and use of biosecurity measures. We find that animal disease externalities should lead to higher stocking on any given farm, and also to deficient entry into animal production. Eradicating the disease in a region increases both the stocking rate per farm and the number of farms. We show that antibiotics as a control strategy should promote intensity of production and the substitution of capital for labor. Also, in long-run market equilibrium a reduction in the price of a biosecurity input could plausibly reduce both operation scale and per-animal input use, i.e., biosecurity inputs can behave like a Giffen good. External biosecurity inputs provided through public animal disease management policy may promote on-farm biosecurity, rather than crowd it out.
This working paper was published as Hennessy, David A. and Tong Wang, "Animal Disease and the Industrialization of Agriculture," Health and Animal Agriculture in Developing Countries, edited by David Zilberman, Joachim Otte, David Roland-Holst, and Dirk Pfeiffer (New York: Springer New York, 2012): 77–99, doi:10.1007/978-1-4419-7077-0_5.
Hennessy, David A. and Wang, Tong, "Animal Disease and the Industrialization of Agriculture" (2010). CARD Working Papers. 511.