Optimal Enforcement Policy and Firms’ Emissions and Compliance with Environmental Taxes
AbstractIn a market where firms with different characteristics decide upon both the level of emissions and their reports, we study the optimal audit policy for an enforcement agency whose objective is to minimize the level of emissions. We show that it is optimal to devote the resources primarily to the easiest-to-monitor firms and to those firms that value pollution the less. Moreover, unless the budget for monitoring is very large, there are always firms that do not comply with the environmental objective and others that do comply; but all of them evade the environmental taxes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1193.
Date of creation: 2004
Date of revision:
environmental taxes; optimal audit policy;
Other versions of this item:
- Macho-Stadler, Ines & Perez-Castrillo, David, 2006. "Optimal enforcement policy and firms' emissions and compliance with environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 110-131, January.
- Inés Macho-Stadler & David Pérez-Castrillo, 2004. "Optimal Enforcement Policy and Firm's Emissions and Compliance with Environmental Taxes," Working Papers 124, Barcelona Graduate School of Economics.
- Inés Macho-Stadler & David Pérez-Castrillo, 2004. "Optimal Enforcement Policy and Firms' Emissions and Compliance with Environmental Taxes," UFAE and IAE Working Papers 612.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-02 (All new papers)
- NEP-LAW-2004-06-02 (Law & Economics)
- NEP-REG-2004-06-02 (Regulation)
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.:
- Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
- Heyes, Anthony, 2002. "A Theory of Filtered Enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 34-46, January.
- Harford, Jon D., 1978. "Firm behavior under imperfectly enforceable pollution standards and taxes," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 26-43, March.
- Ines Macho-Stadler & David Perez-Castrillo, 2000.
"Auditing with Signals,"
Econometric Society World Congress 2000 Contributed Papers
0660, Econometric Society.
- Brooks, Nancy & Sethi, Rajiv, 1997. "The Distribution of Pollution: Community Characteristics and Exposure to Air Toxics," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 233-250, February.
- Sandmo, Agnar, 2000. "The Public Economics of the Environment," OUP Catalogue, Oxford University Press, number 9780198297987, Octomber.
- Harford, Jon D., 1987. "Self-reporting of pollution and the firm's behavior under imperfectly enforceable regulations," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 293-303, September.
- Dasgupta, Susmita & Laplante, Benoit & Mamingi, Nlandu & Wang, Hua, 2001. "Inspections, pollution prices, and environmental performance: evidence from China," Ecological Economics, Elsevier, vol. 36(3), pages 487-498, March.
- Bontems, Philippe & Bourgeon, Jean-Marc, 2005.
"Optimal environmental taxation and enforcement policy,"
European Economic Review,
Elsevier, vol. 49(2), pages 409-435, February.
- P. Bontems & J-M. Bourgeon, 2000. "Optimal Environmental Taxation and Enforcement Policy," THEMA Working Papers 2000-56, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- 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.
- Franckx, Laurent, 2002.
"The Use of Ambient Inspections in Environmental Monitoring and Enforcement When the Inspection Agency Cannot Commit Itself to Announced Inspection Probabilities,"
Journal of Environmental Economics and Management,
Elsevier, vol. 43(1), pages 71-92, January.
- Laurent Franckx, 1998. "The use of ambient inspections in environmental monitoring and enforcement when the inspection agency cannot commit itself to announced inspection probabilities," Center for Economic Studies - Discussion papers ces9835, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- A. Mitchell Polinsky & Steven Shavell, 1999.
"The Economic Theory of Public Enforcement of Law,"
NBER Working Papers
6993, National Bureau of Economic Research, Inc.
- Devon Garvie & Andrew Keeler, 1993.
"Incomplete Enforcement with Endogenous Regulatory Choice,"
873, Queen's University, Department of Economics.
- Garvie, Devon & Keeler, Andrew, 1994. "Incomplete enforcement with endogenous regulatory choice," Journal of Public Economics, Elsevier, vol. 55(1), pages 141-162, September.
- Malik Arun S., 1993. "Self-Reporting and the Design of Policies for Regulating Stochastic Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 241-257, May.
- Anthony Heyes, 1994. "Environmental enforcement when ‘inspectability’ is endogenous: A model with overshooting properties," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(5), pages 479-494, October.
- Innes, Robert, 1999. "Remediation and self-reporting in optimal law enforcement," Journal of Public Economics, Elsevier, vol. 72(3), pages 379-393, June.
- Macho-Stadler, Ines & Perez-Castrillo, J David, 1997. "Optimal Auditing with Heterogeneous Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 951-68, November.
- 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.
- Kaplow, Louis & Shavell, Steven, 1994.
"Optimal Law Enforcement with Self-Reporting of Behavior,"
Journal of Political Economy,
University of Chicago Press, vol. 102(3), pages 583-606, June.
- Louis Kaplow & Steven Shavell, 1991. "Optimal Law Enforcement with Self-Reporting of Behavior," NBER Working Papers 3822, National Bureau of Economic Research, Inc.
- Agnar Sandmo, 2002. "Efficient Environmental Policy with Imperfect Compliance," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(1), pages 85-103, September.
- Heyes, Anthony, 2000. "Implementing Environmental Regulation: Enforcement and Compliance," Journal of Regulatory Economics, Springer, vol. 17(2), pages 107-29, March.
- Swierzbinski Joseph E., 1994. "Guilty until Proven Innocent-Regulation with Costly and Limited Enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 127-146, September.
- Nicola Persico, 2002. "Racial Profiling, Fairness, and Effectiveness of Policing," American Economic Review, American Economic Association, vol. 92(5), pages 1472-1497, December.
- Epple, Dennis & Visscher, Michael, 1984. "Environmental Pollution: Modeling Occurrence, Detection, and Deterrence," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 29-60, April.
- Lanoie, Paul & Laplante, Benoit & Roy, Maite, 1998. "Can capital markets create incentives for pollution control?," Ecological Economics, Elsevier, vol. 26(1), pages 31-41, July.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.