The Desirability of Forgiveness in Regulatory Enforcement
AbstractI present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a firm’s compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a firm’s compliance activities constitutes sufficiently strong evidence of the firm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the firm needs to be monitored. If fines are costly, a further benefit is a reduction in fine costs.
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Bibliographic InfoPaper provided by The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2008-14.
Length: 35 pages
Date of creation: Feb 2007
Date of revision:
enforcement of regulation; selective enforcement; forgiving noncompliance;
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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