Animal disease outbreaks and food market price dynamics: Evidence from regime-dependent modelling and connected scatterplots

Abstract

The economic impacts of animal disease outbreaks have been widely discussed in the literature. Most authors have centred their attention on estimating the direct costs. Recent studies have shown that the indirect economic effects might lead to equal or even higher welfare losses. This study aims to contribute to this field of research by assessing the effect of an animal disease outbreak on food market price dynamics in Mexico, accounting for the potential effect of an antitrust intervention. We employ a regime-dependent vector error correction model and a connected scatterplot analysis. The results show that both the outbreak and the antitrust intervention caused structural breaks in food market price dynamics between producers and consumers, reflected in an increase in the absolute component of the marketing margin, with serious food security implications.