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

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. Copyright 2011, Oxford University Press.