The effects of the pollution cost internalization on Taiwan's hog industry

Duality theory is utilized to develop a translog profit function (TPF) which includes one output (hog), three variable inputs (labour, fodder, and piglet), four fixed inputs (capital, farm size, location, and pollution cost). Based on the trade theory for small country, the factors of corn and soybean imports are introduced into the TPF model to examine the effects of pollution cost internalization on Taiwan's hog supply, input demand, and cereal imports, respectively. Through the analysis of output supply and input demand elasticities, the empirical results show that hog supply decreases 1.60%. The demands for labour, fodder, and piglets decrease 4.18%, 1.44%, and 1.3%, respectively. The decrease in fodder demanded leads the importation of corn and soybean to decrease 1.58% and 1.43%, respectively.