Spatial Dynamics of the Livestock Sector in the United States: Do Environmental Regulations Matter?

This study examines the factors affecting state annual share of national inventory for each of the hog, dairy, and fed-cattle sectors using data from the 48 contiguous states for 1976 to 2000. The paper develops a state-specific, time-series environ-mental stringency measure and introduces instrumental variables to control for the possible endogeneity bias between livestock production decisions and regulatory stringency. The results indicate that differences in the severity of environmental regulations facing livestock producers have had a significant influence on production decisions in the dairy, and particularly the hog sector. Key words: environmental regulation stringency, fixed-effects model, instrumental variable, livestock production, location choice, panel data analysis, pollution haven