The Heterogeneous Impact of China's Place-Based Environmental Regulations on its Hog Industry : A Synthetic Difference-in-Differences Approach

Agricultural water pollution from the livestock industry is a growing concern in China and globally. As opposed to size-based regulations targeting larger facilities in the United States, China’s regulations are place-based in nature. Since 2014, China classified eight urban provinces in the southeast as a Development Control Zone (DCZ), which prohibits new hog facility construction and encourages hog farms to relocate to other regions. Leveraging a novel, doubly-robust identification strategy, synthetic difference-in-differences, and the place-based nature of China’s environmental regulations, we provide one of the first systematic analyses of the impacts of the regulations on the county-level hog and sow inventories, especially revealing heterogeneous responses. Our results show that, on average, the regulations led to a 14.7% reduction in hog inventories after the environmental regulations in the counties in DCZ provinces, mainly resulting from hog farm closures impacting over 20 million head of pigs and causing U.S.$5.62 billion loss in hog sectoral revenue. The treatment effects vary substantially both within and across DCZ provinces: wealthier urban provinces such as Zhejiang experienced a reduction in hog and sow inventories of around 40%, and counties upstream of big cities or those designated as main hog counties saw steeper declines as well