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An Investigation of Voluntary Discovery and Disclosure of Environmental Violations Using Laboratory Experiments

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Author Info
James J. Murphy () (Department of Resource Economics, University of Massachusetts Amherst)
John K. Stranlund () (Department of Resource Economics, University of Massachusetts Amherst)

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Abstract

This paper uses laboratory experiments to test individual responses to policies that seek to encourage firms to voluntarily discover and disclose violations of environmental standards. We find that while it is possible to motivate a significant number of voluntary disclosures without adversely affecting environmental quality, this result is sensitive to both the fine for disclosed violations and the assumption that firms know their compliance status without cost. When firms have to expend resources to determine their compliance status, motivating a significant number of violation disclosures yields worse environmental quality. Finally, relative to conventional enforcement, disclosure polices will result in more violations being sanctioned, but fewer of these sanctions are for violations that are uncovered by the government.

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File URL: http://courses.umass.edu/resec/workingpapers/documents/resecworkingpaper2005-7.pdf
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Publisher Info
Paper provided by University of Massachusetts Amherst, Department of Resource Economics in its series Working Papers with number 2005-7.

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Length: 26 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:dre:wpaper:2005-7

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Web page: http://www.umass.edu/resec/
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Related research
Keywords: enforcement; compliance; environmental standards; self-reporting; self-auditing voluntary disclosure;

Other versions of this item:

Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
    Other versions:
  2. Mishra, Birendra K. & Paul Newman, D. & Stinson, Christopher H., 1997. "Environmental regulations and incentives for compliance audits," Journal of Accounting and Public Policy, Elsevier, vol. 16(2), pages 187-214. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Chris William Sanchirico & Alexander S. P. Pfaff, 2004. "Big Field, Small Potatoes: An Empirical Assessment of EPA's Self- Audit Policy," Public Economics 0403007, EconWPA. [Downloadable!]
    Other versions:
  5. Innes, Robert, 1999. "Remediation and self-reporting in optimal law enforcement," Journal of Public Economics, Elsevier, vol. 72(3), pages 379-393, June. [Downloadable!] (restricted)
  6. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December. [Downloadable!]
  7. Innes, Robert, 2001. "Violator Avoidance Activities and Self-Reporting in Optimal Law Enforcement," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(1), pages 239-56, April.
  8. Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March. [Downloadable!] (restricted)
  9. Pfaff, Alexander S P & Sanchirico, Chris William, 2000. "Environmental Self-Auditing: Setting the Proper Incentives for Discovery and Correction of Environmental Harm," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 189-208, April.
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