Disease Outbreak, Health Scare, and Distance Decay: Evidence from HPAI Shocks in Chinese Meat Sector.

During zoonotic disease shocks (ZDSs), zoonotic disease outbreaks (ZDOs) can induce public health scares (PHSs), causing meat price risks (MPRs). Nevertheless, spatial spillovers of zoonotic disease shocks in meat markets remain unclear. We explore how zoonotic disease outbreaks and public health scares locally and spatially spill over to meat price risks, and whether spatial spillovers of public health scares decay with distance. (i) We construct a long panel covering 30 provinces and 121 months, using highly pathogenic avian influenza (HPAI) epidemics as exogenous shocks in Chinese meat sector. (ii) We decompose zoonotic disease shocks into zoonotic disease outbreaks (objective incident) and public health scares (subjective information) and examine their spillovers to meat price risks. (iii) We identify distance-decaying spatial spillovers of public health scares, by running our dynamic SAR models 147 times, from 80 km to 3000 km with 20 km as incremental value, in a setting with risk-level heterogeneity. (i) Zoonotic disease outbreaks themselves only cause local and neighboring meat price risks for high-risk meat, not for low-risk or substitute meat. (ii) Public health scares exacerbate local and neighboring meat price risks for high-risk and low-risk meat, and local meat price risks for substitute meat. (iii) Spatial spillovers of public health scares are distance-decaying and U-shaped, with four spatial attenuation boundaries, and distance turning point is shorter for high-risk meat (500 km) than for low-risk meat (800 km). We complement the literature by arguing that health scares induced by disease outbreaks negatively spill over to meat prices, with U-shaped distance-decaying spatial effects. This suggests low interregional spatial market integration in meat products, due to distance decay of nonstandardized information and local government control effects, across provincial boundaries. To the best of our knowledge, we are the first to document nonmonotonic distance decay of health scare effects on food prices, previously not found by the literature.