Study shows Iowa State’s Veterinary Diagnostic Laboratory delivers a robust return on investment

Iowa State’s Veterinary Diagnostic Laboratory provides 8-to-1 return on investment; nearly four times more in emergency years.

January 31, 2018

3 Min Read
Study shows Iowa State’s Veterinary Diagnostic Laboratory delivers a robust return on investment

A study by Iowa State University researchers recently published in a peer-reviewed journal found the ISU Veterinary Diagnostic Laboratory delivers a robust return on investment for taxpayers and a sense of stability for Iowa’s animal agriculture industry, even as the laboratory’s facilities have aged over the course of decades.

The study illustrates the extent to which Iowa’s livestock producers and veterinarians rely on ISU’s VDL and models how animal agriculture production would decline without the services provided by the laboratory, which accepts samples from a range of animals and conducts advanced diagnostic techniques to lead disease identification and surveillance efforts. However, many of the lab’s facilities are decades old, and the university has designated construction of a new facility a major priority.

The ISU College of Veterinary Medicine commissioned the original economic analysis of the laboratory, and the authors recently published their findings in the peer-reviewed journal Preventive Veterinary Medicine.

VDL services especially critical during animal health outbreaks
Lee Schulz, an ISU assistant professor of economics and lead author of the paper, says the analysis concludes that the benefits provided by the diagnostic lab outstrip the state tax dollars devoted to it. The paper concludes the lab’s contributions grow even more substantial during animal health emergencies, such as the highly pathogenic avian influenza outbreak in 2015 that affected poultry and egg operations throughout the state.

The authors applied an economic technique called input-output modeling to a range of economic and tax data from 2014 to form a snapshot of how much of Iowa’s economy depends on animal production and processing. Animal production added $13.03 billion to the state’s gross domestic product that year, says Dave Swenson, an ISU associate scientist in economics and co-author of the paper. Of that, $6.7 billion was labor income for workers and proprietors. Animal processing added another $4.4 billion to the state’s gross domestic product in 2014, Swenson says.

The researchers then modeled how the absence of the VDL would affect animal agriculture in the state, using a survey of clients who use the diagnostic lab’s services frequently as a guide. They found that because the diagnostic lab’s activities contribute to the ability of producers to identify and manage disease as well as transport livestock, the lab’s absence would lead to a 6.64% drop in the economic output of animal agriculture in Iowa during a normal year. That drop jumps to 25.92% during an animal health emergency year, according to the study.

High return on investment
The state appropriates roughly $4 million per year to help cover the diagnostic lab’s operation. The economic analysis found the lab, through its support of the animal agriculture industry, helps to generate $31.79 million in state revenue in normal years and $124.15 million in revenue in years with severe animal health emergencies. That equates to a nearly 8-to-1 return on investment in a normal year and a 31-to-1 return on investment in emergency years, Schulz says.

Schulz says producers rely on the diagnostic lab’s services and expertise when making important management decisions. Without that expertise, production efficiencies and competitive advantages would decline.

“By providing diagnosis, prevention and treatment of disease, as well as ongoing monitoring of health status, there’s more certainty about production in the broader supply chain and segments of the industry are more likely to make investments they otherwise would not have made,” Schulz says. “The services the ISU VDL provides help to grow animal agriculture, which significantly contributes to the state’s economy.”  

In addition to Schulz and Swenson, Dermot Hayes, a Charles F. Curtiss Distinguished Professor of Economics and the Pioneer Hi-Bred International Chair in Agribusiness; and Derald Holtkamp, an associate professor of veterinary diagnostic and production animal medicine, also co-authored the study.

The journal article, “Economic impact of university veterinary diagnostic laboratories: A case study” is available online.

Source: Iowa State University 

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