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Regulator reputation, enforcement, and environmental compliance

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  • Shimshack, Jay P.
  • Ward, Michael B.

Abstract

This paper explores empirically the impact of enforcement efforts on environmental compliance, focusing on the role of regulator reputation spillover effects. We find that, on the margin, the impact of a fine for water pollutant violations is about a two-thirds reduction in the statewide violation rate in the year following a fine. This large result obtains through the regulator’s enhanced reputation; the deterrence impact on other plants in a state is almost as strong as the impact on the sanctioned plant. Focusing only on the response of the sanctioned plant, as in previous studies, may therefore seriously underestimate the efficacy of fines and other sanctions. This paper also examines the relative effectiveness of monitoring and enforcement instruments. Non-monetary sanctions contribute no detected impact on compliance, and the marginal fine induces substantially greater compliance than the marginal inspection.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 50 (2005)
Issue (Month): 3 (November)
Pages: 519-540

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Handle: RePEc:eee:jeeman:v:50:y:2005:i:3:p:519-540

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Web page: http://www.elsevier.com/locate/inca/622870

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  1. Deily, Mary E. & Gray, Wayne B., 1991. "Enforcement of pollution regulations in a declining industry," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 21(3), pages 260-274, November.
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  8. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 31(1), pages 96-111, July.
  9. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
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  11. Nadeau, Louis W., 1997. "EPA Effectiveness at Reducing the Duration of Plant-Level Noncompliance," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 34(1), pages 54-78, September.
  12. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  13. Stafford, Sarah L., 2002. "The Effect of Punishment on Firm Compliance with Hazardous Waste Regulations," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 44(2), pages 290-308, September.
  14. Polinsky, A. Mitchell & Shavell, Steven, 1998. "On offense history and the theory of deterrence," International Review of Law and Economics, Elsevier, Elsevier, vol. 18(3), pages 305-324, September.
  15. Nelson, Forrest & Olson, Lawrence, 1978. "Specification and Estimation of a Simultaneous-Equation Model with Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 695-709, October.
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