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Quota Enforcement in Resource Industries: Self-Reporting and Differentiated Inspections


Author Info

  • Lars Gårn Hansen

    (Institute of Food and Resource Economics, University of Copenhagen)

  • Frank Jensen

    (Institute of Food and Resource Economics, University of Copenhagen)

  • Linda Nøstbakken

    (Alberta School of Business, University of Alberta)


Quotas or permits are frequently used in the management of renewable resources and emissions. However, in many industries there is concern about the basic e ectiveness of quotas due to non-compliance. We develop an enforcement model of a quota-regulated resource and focus on a situation with signi cant non-compliance and exogenous constraints on nes and enforcement budget. We propose a new enforcement system based on self-reporting of excess extraction and explicit di erentiation of inspection rates based on compliance history. In particular, we use state-dependent enforcement to induce rms to self-report excess extraction. We show that such system increases the e ectiveness of quota management by allowing the regulator to implement a wider range of aggregate extraction targets than under traditional enforcement, while ensuring an ecient allocation of aggregate extraction. In addition, inspection costs can be reduced without reductions in welfare.

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Bibliographic Info

Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series IFRO Working Paper with number 2010/10.

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Length: 31 pages
Date of creation: Sep 2010
Date of revision: May 2011
Handle: RePEc:foi:wpaper:2010_10

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Related research

Keywords: Enforcement; Non-compliance; Self-reporting; Di erentiated inspections; Quotas; Emissions standards; Resource Management;

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  1. 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.
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