Does Regulation of Manure Land Application Work Against Agglomeration Economies? Theory and Evidence from the French Hog Sector

We examine whether the restrictions on manure land application weaken productivity gains arising from agglomeration in the hog sector. By developing a spatial model of production, we show that while regulating the manure application rate promotes dispersion ceteris paribus, it also prompts farmers to adopt systems of manure treatment that favor the agglomeration of hog production. We estimate a reduced form of the model with a spatial HAC procedure from French data. Our results suggest that land limitations induced by the restrictions on manure application do not favor the dispersion of hog production, and may boost agglomeration economies related to non-market spatial externalities.