The mechanism and heterogeneity of environmental regulations' impact on the technological progress of dairy farming

Abstract

The study analyses the theoretical mechanism through which environmental regulation affects the dairy industry's technological progress, with a particular focus on how the effect is conditional on farm size. Using the input–output data of dairy farms of different sizes from 2009 to 2019 in 10 Chinese provinces/autonomous regions in China and the quantitative measurement index of environmental regulation, the study estimates environmental regulation's heterogeneous influences on the dairy industry's technological progress by dynamic panel data models. The empirical results suggest that, first, environmental regulation has a U-type influence on the technological progress of dairy farming. The U-type influence means moving from pollution control's high cost and low technology progress to the high profit and high innovation input generated by optimizing the breeding structure. Second, the promotion of dairy farming technology depends on farm size. The effect of environmental regulation on technological progress in moderately large-farms showed a U-type relationship. In contrast, the effect in free-range and large-size dairy farms showed a linear and positive relationship. The government should further strengthen environmental regulation based on advancing moderately large-farms in compliance with market mechanisms in the long run. Particular attention should be paid to the forms of environmental regulation so that dairy cattle breeding technology can break through the inflection point of the “U” curve as soon as possible and ensure the significance of the rising stage. Along the way, technical support should be provided for realizing environmental protection and economic growth.