Effects of Size‐Based Environmental Regulations: Evidence of Regulatory Avoidance

Abstract

United States environmental regulations often vary by operation size, with larger facilities facing more regulatory stringency. However, such legislative structure may have unintended consequences if operations downsize, slow their growth, or enter at a smaller scale in order to avoid regulation. In this study we use a regression‐discontinuity framework and exploit the size threshold of federal and state rules targeting large‐scale livestock operations to examine whether facilities adjust size to avoid regulation. We find statistical evidence of avoidance, primarily by operations entering at sizes just below the threshold.

The Production of Safe Food According to Firm Size and Regulatory Exemption: Application to FSMA

“…Note that this last result is similar to the empirical results of Sneeringer and Key (2011). The authors find a mass of firms slightly below the size threshold for binding environmental regulations in livestock production.…”

American Farms Keep Growing: Size, Productivity, and Policy

“…Kirwan, Uchida, and White (2012) showed that elimination of the tobacco program that operated as a supply control cartel and restricted downstream tobacco program that operated as a supply control cartel and restricted downstream marketing relationships allowed rapid farm consolidation that had been delayed by marketing relationships allowed rapid farm consolidation that had been delayed by the operation of the program. Sneeringer and Key (2011) document how regulathe operation of the program. Sneeringer and Key (2011) document how regulations that create size thresholds for more intensive and costly regulatory compliance tions that create size thresholds for more intensive and costly regulatory compliance have caused livestock operations to limit operational size to just below the threshold.…”

Hog Industry Structure and the Stringency of Environmental Regulation

“…There are some reasons to be concerned that operations in the 2,000–2,500 head size category may differ from other operations. For example, Sneeringer and Key () find evidence of an increase in the density of operations just under the 2,500 head threshold. An increase in the number of operations just below the threshold could lead to a negative bias in the estimated coefficient on the inventory of LHFs and a positive bias in the estimated coefficient on the number of LHFs.…”

“…In a study of new entrants to the Canadian livestock industry, Weersink and Eveland () find no evidence that regulatory stringency affects the location decision of producers. Sneeringer and Key () find that environmental regulation leads to some downsizing of farms to inventory levels just below the regulatory threshold.…”