The Unintended Impact of Environmental Regulation on China’s Hog Sector

Abstract

Environmental regulations in China's hog industry aim to adjust industrial layout and reduce pollution. However, these regulations have had an unexpected impact, resulting in varying degrees of hog production decline across regions. This study, is exploring how environmental regulations affect lost hog production in multiple ways through increased supervision and penalties, differentiation of enforcement agents, and indiscriminate closure of farms with non-livestock production areas. Subsequently, employing the Difference-in-Difference approach, we empirically test the effects of these regulations on the hog industry using a unique panel of national county-level hog production data. Our results demonstrate an unexpected decline in hog production, primarily observed in the two key production areas. This suggests that China's hog industry has not experienced a dominant industrial layout adjustment in response to environmental regulation. These findings underscore the need for more precise regulatory standards and stronger enforcement bodies in China's future reforms, with an emphasis on central rather than local-based regulation. This approach is critical for maintaining stable production while reducing pollution.