Dr. Frederic Ang (WUR) “Accounting for Animal Health and Welfare inProduction Analysis: An Application to Swedish Dairy Farms"

Abstract:
Animal welfare and health (AHW) plays an important role in agriculture, which requires analysis from the perspective of both consumption and production. Despite the necessity to incorporate AHW in agricultural production analysis, the theoretical and empirical developments are limited on this subject. This article appropriately characterizes the axiomatic properties of AHW within a production framework. We treat AHW as a weakly disposable output with characteristics of an input and an output, which permits computing AHW-adjusted efficiency measures and shadow prices of AHW. The application focuses on ca. 2,000 observations of Swedish dairy farms over the years 2009 – 2016. We use a Benefit-of-the-Doubt approach for assessing AHW, which captures its multiple dimensions with endogenized weights being optimal for each farmer. Applying a random sample split procedure within a Data Envelopment Analysis framework, we statistically verify the extent to which inclusion of AHW in the production framework changes the efficiency estimates. The results show that including AHW in production analysis statistically increases the average efficiency estimates from 0.932 to 0.973. The sampled farmers predominantly treat AHW as an output rather an input, which results in mainly positive shadow prices of AHW. Our findings suggest that taking into account non-marketed decision variables such as AHW is important for production analysis.