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Hog Industry Structure and the Stringency of Environmental Regulation
Author(s) -
Azzam Azzeddine,
Nene Gibson,
Schoengold Karina
Publication year - 2015
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/cjag.12053
Subject(s) - comparative statics , environmental regulation , economics , production (economics) , marginal cost , marginal abatement cost , econometrics , microeconomics , natural resource economics , ecology , biology , greenhouse gas
The paper develops a comparative statics model of long‐run industry equilibrium in the presence of size‐based environmental regulation stringency and applies the model to the U.S. hog industry. The economic model shows that when size‐based environmental stringency is also size biased, large farms downsize, expand, or do neither depending on how environmental stringency shifts their marginal production cost relative to their average cost. Empirical testing using data from the top‐ten hog‐producing states suggests that environmental regulation stringency has limited impact on small farms and leads to a reduction in the number of large farms. Results cannot reject positive size bias at the farm level due to the stringency of environmental regulation.