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Abstract

This paper compares two ways of financing the combating of Foot and Mouth Disease (FMD) in the EU and uses a simulation model to determine the welfare and production implications of the two systems. The two systems analysed are (i) financing by the tax payers, resembling the system currently in place, and (ii) a compulsory insurance scheme where all costs are converted into regionally differentiated insurance premiums that are paid by the producers. The analysis indicates that welfare gains may be realised by shifting from the former to the latter financing system.

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