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Abstract
In this paper, we evaluated the welfare effects of a hypothetical programme
of Johne's disease eradication from the Scottish dairy herd on different stakeholders in
the domestic milk market. We undertook the evaluation using a Markov-Chain
simulation and applying an economic welfare analysis which takes into consideration
the effects of an eradication programme on product price, on output quantity, on cost
and on milk yield for given levels of supply and demand elasticities. We found that,
following the eradication of the disease, milk yield per cow increased for all herd
sizes in Scotland whereas price and unit cost of milk production fell. Consequently,
milk consumers gained around £14.3 million in discounted economic surplus and
producers with infected herds around £13.4 million whereas producers with uninfected
herds lost around £10.7 million in discounted surplus. The gain in surplus
made by consumers and owners of infected herds, however, more than made up for
the loss in surplus made by owners of un-infected herds. Therefore, on balance,
Scotland gained a net economic surplus of £17 million from the programme.