The Economics of Animal Health: The Case of Avian Influenza in Vietnam

Highly pathogenic avian influenza (HPAI) is a global health risk, as a major global (human) influenza pandemic could arise from evolution of the H5N1 virus that causes HPAI. This could cause significant loss of human life as well large economic losses. HPAI is considered endemic in many countries, including Vietnam, where HPAI outbreaks began in 2003 and have led to the death or culling of 59.3 million of head of poultry (Burgos et al., 2008) and 59 human deaths (World Health Organization, 2010). Given this risk, there is a need to better understand the economics of the animal health and the poultry sector at all levels. In particular poultry is a sector in transition with both traditional and modern sub-sectors and the response to HPAI may lead to reform of traditional sector. This dissertation considers both the producer response to HPAI outbreaks and evaluates consumer demand for traditional poultry and their willingness to pay for making it safer./nThe first chapter provides an introduction to HPAI and poultry sector issues in Viet Nam. The second chapter considers the production response to HPAI outbreaks, specifically the factors driving decision making of small poultry producers after outbreaks. There is currently little empirical evidence on the factors that drive decisions made by smallholders after outbreaks and models predicting farmer behavior are often theoretical or tested using cross sectional data. If the occurrence of epidemics allows farmers to update their beliefs on the likelihood of such epidemics and potentially experience losses, production levels and risk prevention activities should change. I test behavioral predictions based on profit maximizing behavior using survey data with detailed information on poultry production and disease prevention practices of small scale producers before and after a major avian flu outbreak in 2005, as well as household characteristics. I find that these producers have a small but statistically significant decrease in production due to outbreaks, and that disease prevention practices are also affected./nThe third chapter addresses consumer demand for different varieties of chicken, as different chicken production methods lead to differences in quality. In Vietnam, consumer demand for chicken produced under different conditions has important policy implications, including control of HPAI. In this chapter I estimate demand for 3 types of chicken in Hanoi, the capital of Vietnam, and am able to link higher incomes and education to increased consumption of traditionally-produced free range chicken. Although some studies have found evidence of westernization of Asian diets, this study indicates such findings do not extend to all food categories. The findings also indicate that policies that aim to decrease free range chicken production may meet resistance from consumers, even as income increases./nThe fourth chapter considers demand for safety labeled free range chicken in Vietnam. The valuation of safe food by consumers in developing countries affected by diseases such as avian influenza, or with food safety issues in general, is very difficult to identify. Products that have safety-branding or credible certification are not common, and food is usually purchased by bargaining at informal markets. Undertaking demand analysis under such conditions is very rare, especially for food characteristics. However, valuation of safety has important implications for livestock disease policies as well as agricultural sector development. I use data that was collected by an FAO project for a pilot certified supply chain for free range chicken in Hanoi and find that consumers in urban Hanoi on average have a welfare gain of about $0.50-$1.00 per whole chicken purchase for safety-branding and traceability. This indicates market-based policies have potential to increase the safety of poultry production and trading.

Advisor: Zilberman, David