The impact of industrial sulfur dioxide emissions regulation on agricultural production in China †

When environmental regulations do not explicitly target agriculture, it becomes difficult to predict if and how this sector will react. In this study, we delve into this issue by scrutinizing China's flagship program designed to control industrial sulfur dioxide emissions. We employ the difference-in-differences method to analyze extensive agricultural data, quantifying the policy's impact on agriculture from both the intensive and extensive margins. Our results indicate that the policy led to an approximately 9% increase in agricultural value added. This growth mainly stemmed from shifts in land allocation and subsequent changes in fertilizer use, rather than from crop yield improvements. Variations in composite grain yields occurred due to shifts in the crop mix, not from yield improvements in specific crops. Overall, our study found that the policy boosted rural per capita net income by 11.6%.