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Incomplete Enforcement with Endogenous Regulatory Choice

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Author Info
Devon Garvie
Andrew Keeler

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Abstract

This paper extends the economics literature on the incomplete enforcement of social regulation by incorporating regulatory choice in an institutional environment of limited regulatory resources and powers. We show how regulatory decisions determine the structure of incentives faced by regulated firms. Our results indicate that the expense of monitoring relative to the regulator's power to levy penalties helps to explain the differences between "compliance" and "deterrence" enforcement styles. We find that in most circumstances firms with higher abatement costs will receive a larger share of regulatory resources and thus face higher penalties than firms with lower costs.

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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 873.

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Length: 30 pages
Date of creation: 1993
Date of revision:
Handle: RePEc:qed:wpaper:873

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Related research
Keywords: pollution ; regulations;

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  1. 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). [Downloadable!]
    Other versions:
  2. John K. Stranlund, 2006. "Risk Aversion and Compliance in Markets for Pollution Control," Working Papers 2006-2, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
  3. Jorge García & Shakeb Afsah & Thomas Sterner, 2009. "Which Firms are More Sensitive to Public Disclosure Schemes for Pollution Control? Evidence from Indonesia’s PROPER Program," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(2), pages 151-168, February. [Downloadable!] (restricted)
  4. Inés Macho-Stadler, 2008. "Environmental regulation: choice of instruments under imperfect compliance," Spanish Economic Review, Springer, vol. 10(1), pages 1-21, March. [Downloadable!] (restricted)
    Other versions:
  5. Hua Wang & Mamingi, Nlandu & Laplante, Benoit & Dasgupta, Susmita, 2002. "Incomplete enforcement of pollution regulation : bargaining power of Chinese factories," Policy Research Working Paper Series 2756, The World Bank. [Downloadable!]
    Other versions:
  6. Y.H. Farzin & J.D. Kaplan, . "Nonpoint Source Pollution Control Under Incomplete and Costly Information," Working Papers 1999.32, Fondazione Eni Enrico Mattei. [Downloadable!]
  7. Anastasios Xepapadeas, . "Regulation and Evolution of Compliance in Common Pool Resources," Working Papers 0312, University of Crete, Department of Economics. [Downloadable!]
    Other versions:
  8. John K. Stranlund & Carlos A. Chavez & Mauricio G. Villena, 2007. "The Optimal Pricing of Pollution When Enforcement is Costly," Working Papers 2007-6, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
    Other versions:
  9. Anastasios Xepapadeas, 2003. "Regulation and Evolution of Harvesting Rules and Compliance in Common Pool Resources," Economic Working Papers at Centro de Estudios Andaluces E2003/39, Centro de Estudios Andaluces. [Downloadable!]
  10. John K. Stranlund, 2006. "The Regulatory Choice of Noncompliance in Emissions Trading Programs," Working Papers 2006-7, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
    Other versions:
  11. James J. Murphy & John K. Stranlund, 2005. "A Laboratory Investigation of Compliance Behavior under Tradable Emissions Rights: Implications for Targeted Enforcement," Working Papers 2005-1, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
    Other versions:
  12. 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. [Downloadable!] (restricted)
  13. Y. Farzin & Jonathan Kaplan, 2004. "Nonpoint Source Pollution Control under Incomplete and Costly Information," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(4), pages 489-506, August. [Downloadable!] (restricted)
  14. Kaplan, Jonathan D. & Howitt, Richard E., 1997. "Nonpoint Source Pollution, Incomplete Information and Learning : An Entropy Approach," 1997 Annual Meeting, July 13-16, 1997, Reno\Sparks, Nevada 35777, Western Agricultural Economics Association. [Downloadable!]
  15. Andrew Keeler, 1995. "Regulatory objectives and enforcement behavior," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(1), pages 73-85, July. [Downloadable!] (restricted)
  16. Arguedas, Carmen & Rousseau, Sandra, 2009. "A Note on the Complementarity of Uniform Emission Standards and Monitoring Strategies," Working Papers in Economic Theory 2009/06, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  17. Johansson, Robert C., 2001. "Mechanism Design For Nutrient Trading Under Asymmetric Information," 2001 Annual meeting, August 5-8, Chicago, IL 20558, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  18. Larry Karp, 1998. "Nonpoint Source Pollution Taxes and Excessive Tax Burden," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 835, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
    Other versions:
  19. Nyborg, Karine & Telle, Kjetil, 2003. "The Role of Warnings in Regulation: Keeping Control with Less Punishment," Memorandum 24/2003, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  20. Anastasios Xepapadeas & Constadina Passa, 2004. "Participation in and Compliance with Public Voluntary Environmental Programs: An Evolutionary Approach," Working Papers 0403, University of Crete, Department of Economics. [Downloadable!]
    Other versions:
  21. Anastasios Xepapadeas & Constadina Passa, 2005. "Design of Public Voluntary Environmental Programs for Nitrate Pollution in Agriculture: An Evolutionary Approach," Working Papers 0512, University of Crete, Department of Economics. [Downloadable!]
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