Effects of Environmental Regulation on Economic Activity and Pollution in Commercial Agriculture

Research empirically estimating the effects of regulation on economic activity is largely focused on manufacturing, while generally overlooking one of the major polluters in the U.S. - commercial agriculture. Further, the prior literature generally does not estimate the pollution effects associated with regulation, making it difficult to assess the relative social costs and benefits of government action. This article considers a specific set of state policies to examine the results of environmental regulations in the agricultural sector, providing estimates of the magnitude of effects on production as well as pollution. During the 1990's, North Carolina's hog production more than tripled after passage of welcoming state legislation. I find that North Carolina's laws led to an additional 11% increase per year in pork industry presence in North Carolina relative to the rest of the U.S., as well as a 10% increase per county per year in ambient air pollution. Through a series of falsification tests and examinations of alternative hypotheses, I conclude that the air pollution is attributable to the industry; a doubling of production yields a 92% increase in ambient air pollution. The magnitude of the changes in air pollution is large enough to result in significant public health effects, totaling in cost to at least 12% of North Carolina's hog production revenue.