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Do Plants Overcomply with Water Pollution Regulations? The Role of Discharge Variability

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  • Bandyopadhyay Sushenjit

    ()
    (World Bank)

  • Horowitz John

    ()
    (University of Maryland)

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    Abstract

    This paper uses previously unexploited data to examine polluters' compliance with point-source water pollution regulations, a line of inquiry motivated by widespread apparent overcompliance. We use a nationwide panel of monthly plant-level effluent concentrations from 1991-1999. These monthly data allow us to observe month-to-month variability in discharges and therefore to test hypotheses not previously examined.We find that plants that have higher discharge variability have lower median discharges. This is strong evidence for the purported "safety margin" effect. This result then implies that average discharges, a common measure of polluter behavior, are not an accurate indicator of polluter behavior.In response, we construct a plant-specific implied probability of a violation that accounts for discharge variability. We show that plants in richer communities have lower violation probabilities. We further argue that plants are indeed overcomplying with the regulations even when accounting for the safety margin effect.

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    Bibliographic Info

    Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

    Volume (Year): 6 (2006)
    Issue (Month): 1 (January)
    Pages: 1-32

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    Handle: RePEc:bpj:bejeap:v:topics.6:y:2006:i:1:n:4

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Eric Helland, 1998. "The Enforcement Of Pollution Control Laws: Inspections, Violations, And Self-Reporting," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 141-153, February.
    2. Jay P. Shimshack & Michael B. Ward, 2007. "Enforcement and Over-Compliance," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0706, Department of Economics, Tufts University.
    3. Gray, Wayne B. & Shadbegian, R.J.Ronald J., 2004. "'Optimal' pollution abatement--whose benefits matter, and how much?," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 510-534, May.
    4. Earnhart, Dietrich, 2004. "Regulatory factors shaping environmental performance at publicly-owned treatment plants," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 655-681, July.
    5. Dietrich Earnhart, 2004. "The Effects of Community Characteristics on Polluter Compliance Levels," Land Economics, University of Wisconsin Press, vol. 80(3), pages 408-432.
    6. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
    7. John D. McClelland & John K. Horowitz, 1999. "The Costs of Water Pollution Regulation in the Pulp and Paper Industry," Land Economics, University of Wisconsin Press, vol. 75(2), pages 220-232.
    8. Russell W. Pittman, 1981. "Issue in Pollution Control: Interplant Cost Differences and Economies of Scale," Land Economics, University of Wisconsin Press, vol. 57(1), pages 1-17.
    9. Foulon, Jerome & Lanoie, Paul & Laplante, Benoit, 2002. "Incentives for Pollution Control: Regulation or Information?," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 169-187, July.
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    Cited by:
    1. Earnhart, Dietrich & Segerson, Kathleen, 2012. "The influence of financial status on the effectiveness of environmental enforcement," Journal of Public Economics, Elsevier, Elsevier, vol. 96(9-10), pages 670-684.
    2. Earnhart, Dietrich, 2007. "Effects of permitted effluent limits on environmental compliance levels," Ecological Economics, Elsevier, Elsevier, vol. 61(1), pages 178-193, February.
    3. Anthony Heyes & Sandeep Kapur, 2010. "Regulating Altruistic Agents," Birkbeck Working Papers in Economics and Finance, Birkbeck, Department of Economics, Mathematics & Statistics 1010, Birkbeck, Department of Economics, Mathematics & Statistics.
    4. Bouwe R. Dijkstra & Dirk T.G. Rübbelke, . "Group rewards and individual sanctions in environmental policy," Discussion Papers 07/01, University of Nottingham, School of Economics.
    5. Abdoul Sam, 2010. "Impact of government-sponsored pollution prevention practices on environmental compliance and enforcement: evidence from a sample of US manufacturing facilities," Journal of Regulatory Economics, Springer, Springer, vol. 37(3), pages 266-286, June.
    6. Jay P. Shimshack & Michael B. Ward, 2007. "Enforcement and Over-Compliance," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0706, Department of Economics, Tufts University.
    7. Sam, Abdoul G., 2009. "Impact of Government-Sponsored Pollution Prevention Practices on Environmental Compliance and Enforcement: Evidence from a Sample of US Manufacturing Facilities," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin, Agricultural and Applied Economics Association 49306, Agricultural and Applied Economics Association.
    8. Dietrich Earnhart, 2009. "The influence of facility characteristics and permit conditions on the effectiveness of environmental regulatory deterrence," Journal of Regulatory Economics, Springer, Springer, vol. 36(3), pages 247-273, December.

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