Heterogenous 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. 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 synthetic difference-in-differences (SDID), we systematically analyze the impacts of such place-based regulations on the hog industry and water pollution, especially revealing heterogenous responses. Our results show that, on average, the regulations led to heterogenous reductions in hog inventories both within and across DCZ provinces, mainly resulting from the closures of existing hog farms. The effects range from a 2% increase to 40% hog inventory reduction, equivalent to a loss of over U.S. $5.06 billion in the DCZ hog sectoral revenue. We explore three channels to explain the heterogeneity: counties upstream of big cities, counties designated as main hog counties, and counties with drinking water sources serve as origins of the heterogenous effects. However, we find no significant water quality improvement.