Abstract
Abstract This chapter compares two ways of financing the programmes to combat foot and mouth disease in the EU and uses a simulation model to determine the welfare and production implications of the two systems. The two systems analysed are: (1) a purely tax-financed system, where all costs for preventive measures and combating FMD outbreaks are financed by the member state governments and partly reimbursed by the EU; and (2) a compulsory insurance scheme where all costs are converted into regionally differentiated insurance premiums that are paid solely by the producers. Results of the Common Agricultural Policy Regional Impact Analysis (CAPRI) model show that the quantitative effects of compulsory insurance on production are small, but net welfare is increased except in Denmark, Greece, Ireland, and the Netherlands (because of high-density production in those countries).
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