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The use of warnings in the presence of errors

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  • Rousseau, Sandra

Abstract

This article studies the effects of warnings, an enforcement instrument which is often used by environmental inspection agencies. Due to regulatory errors, measured emissions are uncertain and some firms are unjustly penalized. Warnings can then be used as a means to reduce the consequences of these errors. Even though the presence of warnings creates some underdeterrence of medium-cost firms, such a system reduces the overcompliance of low-cost firms caused by the uncertainty surrounding measured emissions. Further, warnings reduce the number of incorrect prosecutions in the case of measurement errors, which is also welfare enhancing, albeit at the cost of increasing the number of violators that go unpunished. For small error sizes, the use of warnings is shown to be welfare improving compared to only using fines.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 29 (2009)
Issue (Month): 3 (September)
Pages: 191-201

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Handle: RePEc:eee:irlaec:v:29:y:2009:i:3:p:191-201

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Web page: http://www.elsevier.com/locate/irle

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Keywords: Enforcement Non-monetary instruments Warnings Measurement errors;

References

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  17. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 2(2), pages 279-303, Fall.
  18. Nyborg, Karine & Telle, Kjetil, 2003. "The Role of Warnings in Regulation: Keeping Control with Less Punishment," Memorandum 24/2003, Oslo University, Department of Economics.
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Citations

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Cited by:
  1. Rousseau, Sandra & Telle, Kjetil, 2010. "On the existence of the optimal fine for environmental crime," International Review of Law and Economics, Elsevier, Elsevier, vol. 30(4), pages 329-337, December.
  2. Carmen Arguedas & Sandra Rousseau, 2008. "Learning about compliance under asymmetric information," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces0808, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  3. Telle, Kjetil, 2013. "Monitoring and enforcement of environmental regulations," Journal of Public Economics, Elsevier, vol. 99(C), pages 24-34.
  4. Marcello Basili & Filippo Belloc & Simona Benedettini & Antonio Nicita, 2012. "Warning, Learning and Compliance: Evidence from Micro-data on Driving Behavior," Department of Economics University of Siena, Department of Economics, University of Siena 639, Department of Economics, University of Siena.
  5. Arun Malik, 2014. "The Desirability of forgiveness in regulatory enforcement," Journal of Regulatory Economics, Springer, vol. 46(1), pages 1-22, August.
  6. Timo Goeschl & Johannes Jarke, 2013. "The warnings puzzle: an upstream explanation," Journal of Regulatory Economics, Springer, vol. 44(3), pages 339-360, December.

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