Measuring the impact of environmental regulation on pig farmers’ production decisions: evidence from Jiangsu Province, China

As the world’s largest pig producer, China’s stable pig production is closely linked to global food security. Amid increasingly stringent environmental governance, environmental regulation has become a critical factor shaping pig farmers’ production decisions. However, it remains unclear how different types of environmental regulation instruments affect farmers’ production scale decisions during China’s ongoing transition from small-scale to large-scale pig farming, and through what mechanisms these effects occur. Based on panel survey data from 323 pig farms across 22 counties in Jiangsu Province, China, this study empirically examines the impact of environmental regulation on farmers’ production scale decisions and explores the underlying mechanisms using a fixed effects model. The results show that different types of environmental regulation instruments exert distinct effects on production scale decisions. Increasing the intensity of control-based environmental regulation leads to a contraction in production scale, whereas strengthening incentive-based regulation promotes production scale expansion. Moreover, the effects of environmental regulation are heterogeneous across farms of different sizes. Specifically, intensified control-based environmental regulation has a more pronounced negative impact on large-scale farms, while incentive-based regulation significantly encourages expansion only among small- and medium-scale farms. These findings contribute to a better understanding of how environmental regulation shapes production decisions in the livestock sector and offer policy-relevant insights for optimizing regulatory design to balance environmental protection and production stability. The study also provides empirical evidence for other developing countries facing similar structural transformations in livestock farming.

1 Introduction

Pig farming plays a crucial role in the global livestock industry. As the largest producer and consumer of pork worldwide, China produced 57.94 million tons of pork in 2023, which represented 60.10% of its total meat production and accounted for 46.54% of global pork production¹. Therefore, maintaining a stable pork supply is essential not only for China’s food security but also for the global meat market.

Historically, pig manure has been a key source of fertilizer in major pork-producing nations, including China, where it was regarded as a valuable agricultural input. However, with the rise of large-scale, industrialized pig farming, the traditional synergy between agriculture and livestock husbandry has been disrupted. As a result, pig manure has transitioned from being a vital agricultural resource to a waste by product with limited utility, contributing to significant environmental challenges on a global scale (Macdonald and Mcbride, 2009).

Faced with the conflict between the development of pig farming and increasing environmental pollution, many countries have introduced environmental regulations targeting the livestock husbandry sector. For example, in the United States, the Clean Water Act (CWA) regulates the discharge of pollutants into water bodies and defines Concentrated Animal Feeding Operations (CAFOs) as point sources. Specifically, the 2003 revisions to the CWA regulations mandated that CAFOs must obtain National Pollutant Discharge Elimination System (NPDES) permits and implement nutrient management plans to mitigate pollution². In alignment with these regulatory requirements, the United States Department of Agriculture (USDA) and the Environmental Protection Agency (EPA) actively promoted the Comprehensive Nutrient Management Plan (CNMP) to regulate the treatment of farm animal manure (Jeff and Marc, 2013). To reduce the economic burden on farmers implementing the CNMP, the USDA launched the Environmental Quality Incentive Program (EQIP), providing financial and technical support to farms for managing environmental pollution (Marc et al., 2004). Germany enacted the Renewable Energy Sources Act (EEG) in 2000 to control environmental pollution from livestock husbandry and to develop the biomass energy potential of animal manure. The EEG has since been amended five times to improve the subsidy system for energy recovery from livestock waste (Meyer et al., 2018). In Asia, Japan promulgated and implemented the Law on the Promotion of Farm Animal Manure Management Planning and Recycling in 2004, which set stringent nitrogen and phosphorus discharge standards for livestock manure and provided a legal basis for environmental enforcement authorities to supervise environmental practices in livestock husbandry (Mishima et al., 2017). Moreover, the Japanese government offers substantial subsidies to encourage farmers to adopt environmentally friendly waste treatment facilities and promote sustainable agricultural practices.

The Chinese government has also progressively strengthened the development of environmental policies for livestock husbandry. In 2001, the State Environmental Protection Administration issued the Administrative Measures for the Prevention and Control of Pollution from Livestock Husbandry. However, these measures were not effectively implemented at the time, as pollution from agricultural production was not yet a prominent issue. In 2013, the State Council promulgated the Regulations on the Prevention and Control of Pollution from Large-scale Livestock Husbandry, which came into effect in January 2014. This regulation represents China’s first agricultural environmental regulation and marks the beginning of the most stringent period of environmental governance in the livestock husbandry sector. Since then, the Chinese government has intensively introduced a series of control-based environmental policies. For instance, the Action Plan for the Prevention and Control of Water Pollution issued in 2015 sets clear pollutant discharge standards and environmental assessment requirements for large-scale pig farms. The Guidelines on Adjusting and Improving Pig Farming Patterns in the Southern Water Network and the National Development Plan for Pig Production (2016–2020), issued by the Ministry of Agriculture in 2015 and 2016, respectively, designate areas where pig farming is either banned or restricted, imposing limitations on pig farming activities in some traditional production regions. In 2017, the State Council released the Opinions on Accelerating the Recovery of Resources from Livestock and Poultry Waste, proposing that the government provide financial support to pig farmers for manure utilization. This initiative marks a policy shift from a reliance solely on control-based regulation to a combination of control-based and incentive-based approaches. By 2020, the Chinese government had allocated a total of 29.6 billion yuan in central funds to support approximately 100,000 large-scale farms in 723 demonstration counties, promoting the utilization of manure resources.

To sum up, the Chinese government has invested substantial administrative effort and financial resources in controlling manure pollution. Environmental regulation has become one of the most important policy factors influencing the development of pig farming in China. Recent literature has extensively examined the multidimensional impacts of these regulations. For instance, studies have highlighted the significant effects of environmental regulations on hog production costs and spatial distribution (Chen et al., 2022; Zeng et al., 2022; Cheng et al., 2025). Additionally, other scholars have explored the role of regulations in driving green technology adoption and carbon emission reduction in the pig industry, identifying complex non-linear or synergistic relationships (Lu et al., 2022; Zhang et al., 2023; Wang Y. et al., 2025). In practice, the tightening of environmental enforcement since the implementation of China’s livestock pollution regulation has required pig farms to invest in manure treatment facilities, adjust production organization, or even reduce/relocate operations, while the expansion of fiscal subsidies and technical support for manure utilization has simultaneously created incentives for upgrading and scale expansion. Against this backdrop, a critical question arises: How does increasing environmental regulation affect the production decisions of Chinese pig farmers? This is the core question that this paper seeks to address.

Answering this question is crucial because China’s pig farming industry is currently undergoing a critical transition from backyard farming to large-scale professionalized operations. Evaluating the impact of environmental regulation on farmers’ production scale decisions will contribute to the further optimization of environmental policies, promote the sustainable development of pig farming in China, and help ensure the stability of the global pork market.

Existing studies have extensively examined the effects of environmental regulation across various sectors, including construction, manufacturing, and agriculture. Recent research emphasizes that environmental regulation is no longer limited to command-and-control instruments, but increasingly relies on a combination of regulatory enforcement, market-based incentives, and voluntary participation mechanisms (Shen et al., 2019). For example, Wang Z. et al. (2025) document the evolving synergistic effects of environmental regulation on waste reduction and carbon mitigation in China, highlighting the importance of regulatory instrument design in shaping firms’ behavioral responses across industries.

The current literature remains divided regarding the impact of environmental regulation on farmers’ production scale decisions. Some studies argue that increased environmental regulation raises the cost of pollution control for farms, thereby eroding the cost advantage of large-scale production and leading farmers to downsize or exit farming to reduce pollution control costs (Sullivan et al., 2000; Larue and Latruffe, 2009; Wu et al., 2015; Huang et al., 2021). Others contend that stricter environmental regulation incentivizes pig farms to adopt new technologies and equipment, prompting farms to expand their production scale in order to spread the fixed costs of treatment facilities and achieve economies of scale in pollution management (Zhou, 2011; Mark, 2001; Wang et al., 2021).

In addition, it has been reported that environmental regulation exerts different effects on farms of varying sizes, though the direction of these effects remains controversial. Some researchers suggest that backyard and small-scale farms are particularly vulnerable to environmental regulation due to capital and technological constraints; as a result, they are more likely to downsize or exit farming under regulatory pressure (Azzam et al., 2015; Qiao et al., 2016). In contrast, medium- and large-scale farms may reduce pollution control costs by leveraging economies of scale and thus expand their operations in response to environmental regulation (Hou and Ma, 2017; Zhang et al., 2019; Yu et al., 2020). However, others argue that, because large-scale farms are the primary targets of environmental regulation, stricter regulations lead to a greater increase in marginal production costs for large-scale farms compared with small-scale farms, thereby prompting large-scale farms to downsize (Azzam et al., 2015; Xu et al., 2021).

We posit that the main reason for these controversies lies in the fact that the existing literature predominantly considers only control-based environmental policies. However, as discussed above, environmental regulation in the livestock husbandry sector worldwide is typically implemented through a combination of policy instruments, which can be broadly categorized into control-based and incentive-based measures according to administrative means (Per et al., 2007). Failure to distinguish between these two types of instruments may therefore lead to biased conclusions.

Against this background, this study systematically examines how different types of environmental regulation instruments—control-based and incentive-based—affect pig farmers’ production scale decisions. We explore the economic mechanisms through which these regulatory instruments operate, with a focus on changes in farmers’ expected income and environmental compliance costs. Furthermore, we investigate whether the impacts of environmental regulation vary across farms of different sizes, namely, small-, medium-, and large-scale operations.

Based on panel survey data from 323 pig farms in Jiangsu Province, China, this study first evaluates the impact of the intensity of control-based and incentive-based environmental regulation on farmers’ production scale decisions using a fixed effects panel model. Secondly, we examine the impact of environmental regulation on farmers’ expected income to illustrate the mechanisms through which environmental regulation influences production scale decisions. Thirdly, we analyze the heterogeneous effects of environmental regulation across farms of different sizes. Finally, policy implications are proposed based on the conclusions.

The main findings are as follows. First, increased intensity of control-based environmental regulation raises farms’ environmental protection costs, reduces both their current and expected income, and leads to a contraction in production scale. Second, increased intensity of incentive-based environmental regulation lowers farms’ environmental protection costs, enhances both their current and expected income, and thereby promotes the expansion of production scale. Third, intensified control-based environmental regulation exerts a negative impact on the production scale expansion decisions of small-, medium-, and large-scale farms, with the negative impact being substantially greater for large-scale farms than for small- and medium-scale farms. Finally, intensified incentive-based environmental regulation has a significant positive effect on the expansion of medium- and small-scale farms but does not have a significant effect on the production scale decisions of large-scale farms.

Compared with previous studies, this study offers the following marginal contributions. First, environmental regulation policy instruments are categorized into control-based and incentive-based types, and the effects of the intensity of these two types of instruments on farmers’ production scale decisions are evaluated through a large-sample empirical study to derive policy implications. Second, the marginal impacts of the two types of environmental regulation on the production scale decisions of farmers across different farm sizes, as well as the reasons for this heterogeneity, are examined, thereby enriching the policy implications derived from the research findings. Moreover, the findings of this study provide valuable policy implications for other developing countries that are also undergoing transformation and upgrading of their pig farming industries.

The remainder of this paper is organized as follows. Section 2 introduces the data sources and analytical methods used in this study. Section 3 presents the empirical results and discussion. Lastly, Section 4 provides the conclusions and policy implications.

2 Data and methods

2.1 Survey data

The survey sample was collected from Jiangsu Province, a key region for livestock supply in the Yangtze River Delta and an economically advanced area in China. We selected Jiangsu as the representative sample for three compelling reasons based on regulatory intensity and production trends.

First, Jiangsu exemplifies a region with high environmental regulatory stringency. Since 2016, the provincial government has enacted 13 specific policies targeting livestock pollution, effectively translating national directives into stricter local enforcement (see Supplementary Appendix Table 1 and Supplementary Appendix Table 2). Notably, the “Two Reductions, Six Treatments, and Three Improvements” (263) action launched in 2017 represents a peak in regulatory intensity, leading to the closure or relocation of 10,372 farms in a single year³. Second, Jiangsu’s production fluctuations mirror the national pattern. As shown in official statistics, Jiangsu’s hog production trends closely align with national data—experiencing a sharp decline in 2019 (due to African Swine Fever and environmental regulations) followed by a robust recovery in 2021 (with an output increase of 21.05%, contributing significantly to national capacity restoration). In 2021, Jiangsu Province had a pig livestock population of 14.826 million heads, accounting for 3.3% of the national total⁴. Therefore, the production decisions of pig farmers in Jiangsu under strict constraints provide a robust microcosm for studying the impact of environmental regulations in China.

A two-stage stratified random sampling method was applied. First, a total of 22 sample counties were randomly selected based on each county’s pig output. Given that major pig-producing areas are concentrated in northern Jiangsu, the proportion of sample counties from northern Jiangsu was appropriately increased. Of the 22 sample counties, 6, 3, and 13 were selected from the southern, central, and northern regions of Jiangsu Province, respectively. These three regions exhibit significant differences in geographic resources, socioeconomic conditions, and livestock husbandry policies.

Second, we visited the veterinary stations for livestock husbandry in each county to obtain lists of pig farms. Based on production scale, 10–25 pig farms were randomly selected within each county. A total of 360 farm questionnaires were collected. After excluding questionnaires containing incorrect information, 323 valid samples were retained, resulting in a response rate of 89.72%. The distribution of the survey sample is illustrated in Figure 1.

Figure 1

Figure 1. Distribution of the survey sample.

The questionnaire used in this study was carefully designed by several research teams. Face-to-face interviews with farm owners were conducted by professionally trained investigators between July and August 2021. A retrospective survey method was adopted: during the interviews, farmers were asked to recall their pig manure treatment methods and their perceptions of environmental policies during the period from 2016 to 2020. The collected information was subsequently cross-verified with local statisticians.

The questionnaire also gathered information on the household characteristics of farm owners and the production characteristics of the farms. In addition, we visited the livestock husbandry departments in the sample counties to collect supplementary information on the development of the livestock husbandry sector and the implementation of related policies at the county level.

2.2 Econometric model

A panel data model was employed to investigate the impact of environmental regulation intensity on the production scale adjustment of pig farms. Pig breeding exhibits inherent periodicity. For instance, after a decision is made to adjust the breeding scale, farms that breed their own piglets typically require at least 10 months to realize an actual change in production capacity. As a result, the current supply capacity is influenced by the farming environment and operational decisions of the previous year. Accordingly, all explanatory variables in the model are lagged by one period. The model is specified as follows:

$C_{i,t}=\alpha +{\beta }_1\times P_{i,t-1}+{\beta }_2\times S_{i,t-1}+\delta \times V_{i,t-1}+{\mu }_i+{\epsilon }_{i,t}(1)$

where the explained variable $C_{i,t}$ denotes the pig inventory of farm $i$ at the beginning of year $t$. There are two key explanatory variables in the model: $P_{i,t-1}$ represents the frequency of environmental inspections received by farm $i$ in period $t-1$, capturing the intensity of control-based environmental regulation; and $S_{i,t-1}$ denotes the proportion of environmental subsidies received by farm $i$ in period $t-1$ relative to its total environmental protection expenditure, capturing the intensity of incentive-based environmental regulation.

$V_{it-1}$ is a vector of control variables. ${\mu }_i$ represents unobservable farm-specific factors that are time-invariant, and ${\epsilon }_{i,t}$ is a random error term. $\alpha$, ${\beta }_1$, ${\beta }_2$, ${\beta }_3$ and $\delta$ are all parameters to be estimated in the model.

Equation 1 is estimated using either a fixed effects model or a random effects model, with the Hausman test employed to determine the appropriate estimation method.

2.3 Identification strategy and data validity

We acknowledge potential endogeneity concerns arising from omitted variables or measurement errors, and our model specification addresses these as follows:

First, to mitigate simultaneity bias (e.g., farm-specific characteristics in period $t$ affecting inspection frequency), all explanatory variables are lagged by one period. This ensures that the regulatory intensity (measured in t-1) temporally precedes the production decision (in t), blocking reverse causality.

Second, the inclusion of farm fixed effects captures time-invariant unobservable, such as a farmer’s inherent management ability or long-term tendency to discharge waste, minimizing omitted variable bias.

Regarding measurement, using village-level inspection frequency effectively mitigates endogeneity. Since the regulatory intensity of a village is exogenous to an individual smallholder, this aggregation filters out idiosyncratic shocks where a specific farmer is targeted due to their own behavior, capturing instead the broader regional regulatory environment. Furthermore, given the “acquaintance society” nature of rural China, inspection actions within a village generate a strong deterrence spillover, affecting the expectations of all local producers. Finally, to ensure the accuracy of self-reported subsidy and cost data, we employed a rigorous face-to-face interview protocol with logical consistency checks to minimize recall bias.

2.4 Variables

Pig farming scale. The pig inventory at the beginning of the current year is used to represent the production scale. Inventory reflects the available supply of commercial pigs on the farm at a given point in time and serves as a proxy for its production capacity. Since panel data are employed, this measure also captures changes in production scale over time.

Frequency of environmental inspection. Environmental inspections are primarily conducted through routine and random checks by local environmental protection and agricultural departments. These inspections cover the verification of environmental compliance certificates and related documentation, the assessment of farm manure management facilities, and the monitoring of water and soil conditions surrounding the farms. Inspection results form the basis for the government to take compulsory measures and impose environmental penalties.

Therefore, the frequency of environmental inspection reflects the emphasis placed by local governments in the sample areas on pollution control in livestock husbandry. Considering the lagging effect of policies and the exogeneity requirement for explanatory variables, the frequency of environmental inspection is measured by the number of inspections carried out in the village where the farm is located during the previous year. This approach recognizes that environmental inspections conducted on neighboring farms also exert pressure on the target farm. An increase in inspection frequency raises the opportunity cost associated with potential environmental penalties for farms. Thus, it is expected that a higher frequency of environmental inspections negatively impacts adjustments to farming scale.

Proportion of environmental subsidy. Environmental subsidy is the primary policy instrument of incentive-based environmental regulation. These subsidies are mainly linked to farm manure treatment facilities, and are provided openly for technical equipment related to manure treatment and utilization, often integrated into agricultural machinery subsidy programs. Under existing policies, farms can access subsidies through livestock and poultry manure resource recovery projects, the purchase of environmental protection facilities, and biogas production initiatives.

Following the setting of the subsidy–cost ratio for biogas digester construction described in the existing literature (Sun et al., 2014), and considering the lagging effect of policy implementation, the level of environmental subsidy is measured by the proportion of the total environmental subsidy received by the farm in the previous period to the farm’s total environmental management costs during the same period. Compared with simply using the absolute subsidy amount, this proportional measure eliminates the influence of farming scale and better captures the relative level of financial support received.

A higher proportion of environmental subsidy reduces the environmental management costs borne by farms and alleviates their financial burden for scale expansion. Therefore, an increase in the proportion of environmental subsidy is expected to promote the expansion of production scale.

Control variables. Based on previous studies on the factors influencing farmers’ production decisions (Erik, 2004; Lambert et al., 2007; Adam et al., 2011; Zhang et al., 2013; Pan et al., 2021), eight key variables representing the production and operational characteristics of pig farms as well as external environmental factors are included as control variables. Consistent with the explanatory variables, all control variables are lagged by one period.

In addition, a time dummy variable is incorporated to control for a major background event—the outbreak of African swine fever—which spread across China in August 2018 and had a significant impact on pig farms by raising production costs and increasing farming risks, potentially affecting production adjustments during 2019–2020.

The definitions and measurements of all variables are presented in Table 1.

Table 1

Table 1. Descriptive statistics of variables.

3 Results and discussion

3.1 Baseline results

The baseline regression results for model (1) are presented in Table 2. The Hausman test yields a value of 63.10, which is significant at the 1% level. This result indicates that the fixed effects model (FE-OLS) is preferred over the random effects model (RE-GLS). The F-statistic for the fixed effects model is also significant at the 1% level, suggesting that the model exhibits a good fit.

Table 2

Table 2. Estimates of the impact of environmental regulation intensity on farmers’ production scale adjustment.

Accordingly, the empirical analysis in this section is based on the fixed effects model estimates reported in column (3) of Table 2. For robustness, the results of the pooled ordinary least squares (OLS) regression and the random effects model (RE-GLS) are also presented.

As shown in column (3) of Table 2, the coefficient of environmental inspection frequency is negative and significant at the 5% level. This finding indicates that an increase in the intensity of control-based environmental regulation inhibits farmers’ decisions to expand their production scale.

A possible explanation is that as the intensity of control-based environmental regulation increases, the rise in environmental protection costs associated with expanding unit production scale may outweigh the cost savings achieved through economies of scale, thereby leading to a reduction in farming income. Consequently, farmers may refrain from expanding production scale when it becomes unprofitable.

The estimated coefficient is −61.05, suggesting that each additional environmental inspection conducted in the village during the previous year leads to an average reduction of nearly 62 pigs in a farm’s pig inventory at the beginning of the current period. In addition, the coefficients of control-based environmental regulation reported in columns (1) and (2) of Table 2 are also negative and significant at the 10% level, further supporting the robustness of these findings.

The coefficient of environmental subsidy level is positive and significant at the 5% level, indicating that an increase in the intensity of incentive-based environmental regulation promotes farmers’ decisions to expand their production scale.

A possible explanation is that, with the support of subsidies, the fixed costs of environmental protection equipment borne by farmers are effectively reduced. As a result, farmers are able to purchase equipment with greater manure treatment capacity. Since pollution treatment itself exhibits economies of scale, farmers can expand their production scale to enhance the utilization efficiency of environmental protection equipment, thereby lowering the average cost of manure treatment per unit and achieving economies of scale in pollution control.

The estimated coefficient is 35.32, suggesting that for every 1% increase in the proportion of government subsidy to a farm’s environmental protection costs in the previous year, the farm’s current pig inventory increases by an average of nearly 36 pigs. This result indicates that government subsidies for the construction of environmental protection facilities not only promote the adoption of green treatment technologies by farms but also positively influence their decisions to expand production scale.

Moreover, the coefficients of incentive-based environmental regulation reported in columns (1) and (2) of Table 2 are also positive and significant at the 5% level, further supporting the robustness of these conclusions.

Taken together, these baseline results establish the main empirical relationship between environmental regulation and production scale decisions. To further validate these findings, the following sections examine whether the estimated effects are supported by plausible income-based mechanisms and whether they remain consistent across farms of different sizes.

3.2 Mechanism analysis

Profit maximization is the fundamental goal for pig farmers, as rational economic agents, in determining their optimal production levels (Yu et al., 2012). Past inputs, outputs, and external operating environments determine current income, which in turn shapes farmers’ expectations for future income. When expected income rises, farmers are more likely to expand their production scale, and conversely, when expected income declines, they are more likely to contract (Hou and Ma, 2017).

Although it is difficult to objectively measure farmers’ expected income, expected income is primarily determined by current income. Therefore, to elucidate the mechanism by which environmental regulation affects production scale decisions, this study examines the impact of environmental regulation on current income. The farm’s relative current income is measured by net farming income per unit, calculated as the current net income (total income minus total cost) divided by the annual pig output. The explanatory and control variables are the same as those used in Equation 1, and a fixed effects model is employed, consistent with the baseline regression.

The estimates from the mechanism analysis are presented in Table 3. Columns (1) and (2) report the results when control-based and incentive-based environmental regulation are included separately, respectively. Column (3) reports the results when both types of environmental regulation are included simultaneously. Due to space limitations, the estimates for the control variables are not reported in the following tables.

Table 3

Table 3. Impact of environmental regulation on farming income.

As shown in the estimates, the frequency of environmental inspections has a negative impact on current net income, significant at the 10% level, while the level of environmental subsidy has a positive impact on current net income, significant at the 5% level. The estimates of the core explanatory variables are generally consistent regardless of whether control-based and incentive-based regulation are included separately or together, supporting the robustness of the conclusions.

These findings indicate that control-based environmental regulation increases farms’ environmental protection costs and reduces profit margins, leading to more pessimistic expectations for future income and, consequently, a contraction in production scale. In contrast, incentive-based environmental regulation reduces environmental protection costs and increases profit margins, fostering more optimistic expectations for future income and thereby promoting expansion of production scale.

Specifically, the estimated coefficients suggest that each additional environmental inspection per year reduces net income by 33.10 yuan per head, while each 1% increase in the proportion of environmental subsidy results in an increase of 7.59 yuan per head in net income.

The mechanism analysis provides direct empirical support for the baseline results by showing that control-based and incentive-based environmental regulations affect farmers’ production scale decisions through their impacts on current income and, consequently, expected income. The consistency between the mechanism results and the baseline estimates serves as an internal validation of the study’s main conclusions.

3.3 Heterogeneity analysis

Previous studies have reported that, due to significant differences in capital constraints, labor availability, technical capacity, and risk tolerance, farms of different sizes make different production decisions when faced with the same control-based policies and subsidy incentives (Daxini et al., 2019; Yan et al., 2019).

Following the classifications in the China Livestock Husbandry Statistical Yearbook, pig farms are categorized into small-scale farms (annual pig output of fewer than 500 pigs), medium-scale farms (500–4,999 pigs), and large-scale farms (5,000 pigs or more) based on their annual pig output (Chen et al., 2016).

Table 4 reports the model estimates for subsamples of farms at different scales. As shown by the results, with respect to control-based environmental regulation, the frequency of environmental inspections has a negative impact on the production scale of small-, medium-, and large-scale farms. Notably, this negative impact is significant at the 1% level for large-scale farms.

Table 4

Table 4. Impact of environmental regulation on the scale adjustment of farms of different sizes.

The estimated coefficients suggest that the inhibitory effect of environmental inspection frequency on production scale is much stronger for large-scale farms than for medium- and small-scale farms. This finding indicates that large-scale farms are more sensitive to the intensity of control-based environmental regulation and may significantly reduce their production scale in response to stricter environmental policies. One possible explanation is that small-scale farms often have sufficient land resources for manure utilization and can meet pollution discharge standards by applying pig waste to agricultural soils or employing other simple treatment methods (Chen et al., 2022). Consequently, enhanced environmental regulation has a relatively limited impact on their scale adjustments.

However, when local environmental pressure intensifies, the total number of pigs on farms, particularly large-scale farms, is often strictly controlled, and stronger environmental supervision is imposed on large-scale operations. Due to the limited land available for manure disposal, large-scale farms incur higher environmental management costs (Cao et al., 2024). Moreover, given the high specificity of their assets, large-scale farms are generally less likely to exit the market. To continue operations under stringent environmental supervision, they may be forced to sacrifice part of their farming profits by reducing their production scale to lower pollution emissions.

Regarding incentive-based environmental regulation, the level of environmental subsidy has a significant positive effect on the expansion of medium- and small-scale farms, significant at the 5% level. However, no significant effect is observed on the production scale decisions of large-scale farms. This suggests that environmental subsidies are more effective in promoting expansion among small- and medium-scale farms than among large-scale farms (Lu et al., 2022).

One possible reason is that small-scale farms face greater financial constraints, making the marginal effect of increased subsidies on alleviating financial stress more pronounced (Wu et al., 2024). Another possible explanation is that, as farm size increases, the proportion of fixed asset investment (such as environmental protection equipment) in total operating costs decreases (Wang et al., 2022). Consequently, the core cost of manure treatment gradually shifts toward variable inputs, including water, electricity, labor, and consumables. These high variable costs borne by large-scale farms may inhibit their expansion decisions despite available subsidies.

The heterogeneity analysis further validates the baseline findings by demonstrating that the direction of the effects of environmental regulation remains consistent across farm sizes, while the magnitude varies in economically intuitive ways. This pattern is consistent with regulatory targeting practices and cost structures in pig farming, thereby strengthening the credibility and external relevance of the empirical conclusions.

3.4 Discussion

The findings of this study contribute to the ongoing debate on how environmental regulation influences livestock farmers’ production decisions. Existing studies report mixed evidence regarding whether stricter environmental regulation induces farm expansion or contraction. Some scholars argue that environmental regulation increases compliance costs and erodes economies of scale, thereby discouraging farm expansion or even inducing exit (Sullivan et al., 2000; Wu et al., 2015; Huang et al., 2021). Others suggest that stricter regulation encourages technological upgrading and scale expansion in order to dilute fixed pollution control costs (Zhou, 2011; Wang et al., 2021).

Our results help reconcile these seemingly contradictory findings by explicitly distinguishing between control-based and incentive-based environmental regulation. Consistent with studies emphasizing the cost-increasing effect of regulation, we find that intensified control-based regulation, proxied by the frequency of environmental inspections, significantly inhibits farmers’ production scale expansion. This effect operates through increased environmental protection costs and reduced farming income, leading to more pessimistic expectations regarding future profitability. In this respect, our findings align with the cost-compliance perspective in the literature.

In contrast, our results also support the strand of literature highlighting the scale-promoting role of environmental subsidies. Incentive-based environmental regulation significantly encourages production scale expansion by reducing the fixed costs of pollution control and improving farm profitability. This finding is consistent with studies suggesting that well-designed subsidy policies can offset regulatory compliance costs and stimulate both technological adoption and scale efficiency in livestock production (Mark, 2001; Lu et al., 2022). The coexistence of these two effects underscores the importance of viewing environmental regulation as a policy mix rather than a single-dimensional instrument.

Moreover, the heterogeneity analysis further explains why previous studies have reached divergent conclusions. We find that control-based regulation exerts a stronger inhibitory effect on large-scale farms, while incentive-based regulation mainly promotes expansion among small- and medium-scale farms. This result suggests that farm size, asset specificity, and cost structure play critical roles in shaping farmers’ responses to environmental regulation. Large-scale farms, which are often subject to stricter supervision and face higher variable pollution control costs, may be more inclined to reduce scale under regulatory pressure. By contrast, small- and medium-scale farms benefit more from subsidies due to tighter financial constraints and higher marginal returns to policy support.

Overall, this study highlights that the impact of environmental regulation on pig farmers’ production decisions depends crucially on the type of policy instrument and farm characteristics. Failure to distinguish between control-based and incentive-based regulation may lead to incomplete or even misleading conclusions, which may partly explain the inconsistencies observed in the existing literature.

4 Conclusions and policy implications

This study investigates the impact of environmental regulation on the production scale decisions of Chinese pig farmers under environmental constraints, elucidates the underlying mechanisms, and further examines the heterogeneous effects across farms of different sizes. The goal is to provide policy implications for optimizing environmental regulation in livestock husbandry, thereby helping to ensure a stable supply of pigs in China and globally (Yao, 2024). The findings of this study also offer valuable insights for other developing countries engaged in environmental management of livestock husbandry. To achieve these objectives, empirical analysis was conducted using a fixed effects model based on panel survey data from 323 pig farms across 22 counties in Jiangsu Province, China. The following conclusions are thus drawn:

First, different types of policy instruments for environmental regulation exert different effects on farmers’ production scale decisions. Increased intensity of control-based environmental regulation raises farms’ environmental protection costs and reduces both their current net income and expected income, ultimately leading to a reduction in production scale. Specifically, each additional environmental inspection conducted in the region during the previous year results in an average reduction of nearly 62 pigs in a farm’s pig inventory at the beginning of the current period.

Second, increased intensity of incentive-based environmental regulation lowers farms’ environmental protection costs and increases both their current net income and expected income, thereby promoting production scale expansion (Wu et al., 2022). For every 1% increase in the proportion of government subsidies to environmental protection costs in the previous year, a farm’s current pig inventory increases by an average of nearly 36 pigs.

Third, environmental regulation has heterogeneous effects on the production scale decisions of farms of different sizes. Intensified control-based environmental regulation negatively impacts the production scale expansion decisions of small-, medium-, and large-scale farms, with the negative impact being significantly greater for large-scale farms. In contrast, intensified incentive-based environmental regulation has a significant positive effect on the expansion of medium- and small-scale farms, but no significant impact on the production scale decisions of large-scale farms.

Beyond summarizing empirical findings, this study makes several theoretical contributions to the literature on environmental regulation and livestock production decisions. First, by explicitly distinguishing between control-based and incentive-based environmental regulation, this study extends existing research that typically treats environmental regulation as a single, homogeneous policy instrument. This distinction helps reconcile the mixed and sometimes contradictory conclusions in the literature regarding whether environmental regulation induces farm expansion or contraction. Second, by incorporating farmers’ income expectations into the analytical framework, this study provides empirical evidence on the income-based mechanism through which different regulatory instruments influence production scale decisions. Third, the heterogeneity analysis across farm sizes further enriches the theoretical understanding of how farm characteristics shape behavioral responses to environmental regulation.

From a practical perspective, the findings of this study offer important insights for policymakers seeking to balance environmental protection with the stability of livestock supply. The results demonstrate that excessive reliance on control-based regulation may unintentionally suppress production incentives, particularly for large-scale farms that are critical to ensuring stable pork supply. In contrast, well-targeted incentive-based policies can effectively offset compliance costs and encourage environmentally sustainable expansion, especially among small- and medium-scale farms. These findings provide an empirical basis for designing differentiated environmental policy instruments and optimizing subsidy allocation, not only in China but also in other developing countries undergoing a transition toward large-scale and environmentally regulated livestock production.

Based on the findings of this study, the following policy implications are proposed:

On the one hand, the government should strengthen the regulation of control-based environmental policies and ensure that land requirements for livestock husbandry are adequately met. Local governments should be prohibited from arbitrarily expanding prohibited livestock farming areas beyond the legally specified scope (Wang Y. et al., 2025), forcibly expelling farmers through administrative measures, or imposing unlawful penalties on farmers. These measures are necessary to mitigate the adverse impact of environmental regulation on normal agricultural production.

On the other hand, greater emphasis should be placed on incentive-based environmental regulation, and an environmental governance strategy that prioritizes incentives and is supplemented by command-and-control measures should be implemented. Furthermore, a larger proportion of subsidies should be allocated to small- and medium-scale farms to lower their manure management costs and encourage production expansion, thereby playing a crucial role in ensuring a stable supply of pigs (Zhang et al., 2024).

Last but not least, this study has two main limitations. First, the analysis is based on survey data collected from Jiangsu Province, which serves as a representative region for livestock husbandry in China. However, as all empirical results are derived from this specific region, the generalizability of the findings to other regions in China remains debatable (Sun et al., 2019). Second, in recent years, China’s pig industry has been severely affected by African swine fever, which has had a significant impact on farmers’ production decisions. Although a control variable for African swine fever was included in the analysis, it is difficult to completely isolate its effects from the implementation of environmental regulation.

Therefore, future research will be based on a nationwide survey and will focus on examining the interaction between African swine fever and environmental regulation, with the goal of producing more generalizable and accurate conclusions.

Data availability statement

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

Ethics statement

Ethical review and approval was not required for the study on human participants in accordance with the local legislation and institutional requirements. Written informed consent from the (patients/ participants OR patients/participants legal guardian/next of kin) was not required to participate in this study in accordance with the national legislation and the institutional requirements.

Author contributions

FZ: Conceptualization, Resources, Supervision, Writing – review and editing. YY: Conceptualization, Funding acquisition, Investigation, Project administration, Validation, Writing – review and editing. YG: Data curation, Formal Analysis, Funding acquisition, Investigation, Methodology, Software, Visualization, Writing – original draft. HH: Project administration, Resources, Validation, Writing – review and editing.

Funding

The author(s) declared that financial support was received for this work and/or its publication. This study was supported by National Natural Science Foundation of China (72403110), Humanities and Social Science Foundation of Ministry of Education of China (23YJCZH272), Social Science Foundation of Jiangsu Province (25EYB002), Jiangsu Provincial Department of Education (2022SJYB0288 and 22KJB630001), Foundation of JSAST (JSKX0225013), Project of Jiangsu Open University (2023XK006).

Conflict of interest

The author(s) declared that this work was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Generative AI statement

The author(s) declared that generative AI was not used in the creation of this manuscript.

Any alternative text (alt text) provided alongside figures in this article has been generated by Frontiers with the support of artificial intelligence and reasonable efforts have been made to ensure accuracy, including review by the authors wherever possible. If you identify any issues, please contact us.

Publisher’s note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

Supplementary material

The Supplementary Material for this article can be found online at: https://www.frontiersin.org/articles/10.3389/fenvs.2026.1737909/full#supplementary-material

Footnotes

¹2025-04-10, United States Department of Agriculture. Livestock and Poultry: World Markets and Trade. Visit the website: https://apps.fas.usda.gov/psdonline/circulars/livestock_poultry.pdf

²U.S. Environmental Protection Agency. 2003. National Pollutant Discharge Elimination System permit regulation and effluent limitation guidelines and standards for concentrated animal feeding operations(CAFOs); final rule. February 12. Federal Register 68(29):7176-7274.

³Jiangsu Provincial People’s Government.Recommendations on protecting the drinking water quality safety of the Jiangsu section of the Yangtze River. http://www.jiangsu.gov.cn/art/2018/6/20/art_59167_7744401.html

⁴Data source: Statistical database of the Ministry of Agriculture and Rural Affairs of China and the Department of Agriculture and Rural Affairs of Jiangsu Province.

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