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Environmental Regulations and Livestock Production Levels: What is the Direction of Causality?

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  • Herath, Deepananda P.B.
  • Weersink, Alfons
  • Thrikawala, Sunil

Abstract

Fundamental to the assertion that environmental regulatory standards are strategically set by decentralized authorities and consequently firms respond to spatial differences in regulatory standards is the underline causal relationship. Establishing the cause-effect association between regulatory standard setting and industry response is essential to justify the existence of the pollution haven and the potential for a race to the bottom. In this paper using 25 years data of the livestock production intensities for hog, dairy and fed cattle sectors and environmental regulatory stringency measure from 1975 to 2000 for 48 contiguous states we explore whether the direction of causality as suggested by race to the bottom hypothesis is in fact supported by the empirical evidence and hence the potential for existence of pollution haven is real in the U.S. livestock production sector. The results in general support the existence of pollution havens and potential for a race to the bottom at the regional level. There were no convincing evidences supporting the reserve causality that the “"industry driving policy"” hypothesis. Across the different livestock types, dairy sector provided conclusive evidence that in the regions with substantial growth of dairy inventories, there are strong evidences for a race to the bottom.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21482.

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Date of creation: 2006
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Handle: RePEc:ags:aaea06:21482

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Keywords: Environmental Economics and Policy;

References

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  1. Gunnar A. Eskeland & Ann E. Harrison, 2002. "Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis," NBER Working Papers 8888, National Bureau of Economic Research, Inc.
  2. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
  3. Venet, Baptiste & Hurlin, Christophe, 2001. "Granger Causality Tests in Panel Data Models with Fixed Coefficients," Economics Papers from University Paris Dauphine 123456789/6159, Paris Dauphine University.
  4. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
  5. Robert Hoffmann & Lee Chew Ging & Bala Ramasamy & Matthew Yeung, 2004. "FDI and Pollution: A Granger Causality Test using Panel Data," CEABuR Working Papers 2, Centre for Europe-Asia Business Research.
  6. Martin, Laura L. & Zering, Kelly D., 1997. "Relationships Between Industrialized Agriculture And Environmental Consequences: The Case Of Vertical Coordination In Broilers And Hogs," Staff Papers 11551, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  7. Daniel A. Summer & Christopher A. Wolf, 2002. "Diversification, Vertical Integration, and the Regional Pattern of Dairy Farm Size," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(2), pages 442-457.
  8. Brian Roe & Elena G. Irwin & Jeff S. Sharp, 2002. "Pigs in Space: Modeling the Spatial Structure of Hog Production in Traditional and Nontraditional Production Regions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 259-278.
  9. Park, Dooho & Seidl, Andrew & Davies, Stephen, 2002. "Environmental Policy and Industry Location: The Case of the U.S. Livestock Industry," The Review of Regional Studies, Southern Regional Science Association, vol. 32(2), pages 293-307, Summer/Fa.
  10. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
  11. Daniel L. Millimet & John A. List, 2003. "A Natural Experiment on the 'Race to the Bottom' Hypothesis: Testing for Stochastic Dominance in Temporal Pollution Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 395-420, 09.
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