Authors: Peter B. Dixon and Maureen T. Rimmer
It is possible that Covid will produce permanent changes in work practices that increase costs in U.S. meat-processing plants. These changes may be beneficial for the safety of meat-processing workers and the health of the community more generally. However, they will have economic costs. In this paper we use USAGE-Food, a detailed computable general equilibrium (CGE) model of the U.S., to work out how those costs would be distributed between farmers and consumers of meat products. We also calculate industry and macroeconomic effects. Despite modelling the farmers as owning fixed factors, principally their own labour, we find that the farmer share in extra processing costs is likely to be quite moderate. Throughout the paper, we support simulation results by back-of-the-envelope calculations, diagrams and sensitivity analysis. These devices identify the mechanisms in the model and key data points that are responsible for the main results. In this way, we avoid the black-box criticism that is sometimes levelled at CGE modelling.
JEL classification: D58; Q12; Q13; Q17; Q18
Keywords: split of meat-processing costs between farmers and consumers; computable general equilibrium simulations; back-of-the-envelope explanations; diagrammatic analysis
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