Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism
AbstractWe extend the economic theory of regulation to allow for strategic self-regulation that preempts political action. When political "entry" is costly for consumers, firms can deter it through voluntary restraints. Unlike standard entry models, deterrence is achieved by overinvesting to raise the rival's welfare in the event of entry. Empirical evidence on releases of toxic chemicals shows that an increased threat of regulation (as proxied by increased membership in conservation groups) indeed induces firms to reduce toxic releases. We establish conditions under which self-regulation, if it occurs, is a Pareto improvement once costs of influencing policy are included. Copyright 2000 by the University of Chicago.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Law & Economics.
Volume (Year): 43 (2000)
Issue (Month): 2 (October)
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Web page: http://www.journals.uchicago.edu/JLE/
Other versions of this item:
- John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
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