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Strict Liability as a Deterrent in Toxic Waste Management: Empirical Evidence from Accident and Spill Data

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  • Alberini, Anna
  • Austin, David H.

Abstract

This paper explores the issue of whether strict liability imposed on polluters has served to reduce uncontrolled releases of toxics into the environment. Strict liability should create additional incentives for firms to handle hazardous substances more carefully, thus reducing the future likelihood of uncontrolled releases of toxics. However, the size of these incentives may vary according to the size of a firm's assets, since asset size is the ultimate limit on a firm's liability. We are therefore interested to see whether imposing strict liability for the cost of remediation at hazardous waste sites has encouraged firms to handle toxic materials more carefully and has uniformly reduced the incidence of toxic spills, or whether the effect is dependent on firm size and other factors. To answer these questions, we exploit the variation in state hazardous waste site laws across states and over time. We use data on accidents and spills involving hazardous substances coming from a comprehensive database of events reported to the US EPA under their Emergency Response Notification System (ERNS), and fit regressions relating the frequency of spills of selected chemicals used in manufacturing to the type of liability in force in a state. We control for the extent of manufacturing activity in the state, and include in the regression other program features that might alter firms' expected outlays in the event of an accident, and thus affect firms' incentives to take care. Results vary with the chemical being analyzed. For some chemicals, such as halogenated solvents, the presence of strict liability does not provide any additional explanatory power for the number of spills beyond what is achieved by the number of establishments and the sectoral composition of manufacturing. For other families of chemicals (acids, ammonia and chlorine), we find that the impacts of manufacturing activities on the number of spills in each state do vary systematically with the liability regime. I
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  • Alberini, Anna & Austin, David H., 1999. "Strict Liability as a Deterrent in Toxic Waste Management: Empirical Evidence from Accident and Spill Data," Journal of Environmental Economics and Management, Elsevier, vol. 38(1), pages 20-48, July.
  • Handle: RePEc:eee:jeeman:v:38:y:1999:i:1:p:20-48
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    1. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, pages 626-634.
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    Cited by:

    1. van 't Veld, Klaas, 2006. "Hazardous-industry restructuring to avoid liability for accidents," International Review of Law and Economics, Elsevier, vol. 26(3), pages 297-322, September.
    2. Vera Angelova & Olivier Armantier & Giuseppe Attanasi & Yolande Hiriart, 2014. "Relative performance of liability rules: experimental evidence," Theory and Decision, Springer, pages 531-556.
    3. Pierre Bentata, 2014. "Liability as a complement to environmental regulation: an empirical study of the French legal system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(3), pages 201-228, July.
    4. Guerrero, Santiago & Innes, Robert, 2008. "Statutory Rewards to Environmental Self-Auditing: Do They Reduce Pollution and Save Regulatory Costs? Evidence from a Cross-State Panel," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6204, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Wayne B. Gray & Jay P. Shimshack, 2011. "The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, pages 3-24.
    6. Suzi Kerr, 2013. "Managing Risks and Tradeoffs Using Water Markets," Working Papers 13_13, Motu Economic and Public Policy Research.
    7. Austin, David & Alberini, Anna, 1999. "Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases," Discussion Papers dp-99-29, Resources For the Future.
    8. Hilary Sigman, 2010. "Environmental Liability and Redevelopment of Old Industrial Land," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 289-306, May.
    9. van 't Veld, Klaas & Shogren, Jason F., 2012. "Environmental federalism and environmental liability," Journal of Environmental Economics and Management, Elsevier, pages 105-119.
    10. Alló, Maria & Loureiro, Maria L., 2013. "Estimating a meta-damage regression model for large accidental oil spills," Ecological Economics, Elsevier, vol. 86(C), pages 167-175.
    11. Mary Evans & Lirong Liu & Sarah Stafford, 2011. "Do environmental audits improve long-term compliance? Evidence from manufacturing facilities in Michigan," Journal of Regulatory Economics, Springer, pages 279-302.
    12. Eberhard Feess & Gerd Muehlheusser & Ansgar Wohlschlegel, 2009. "Environmental liability under uncertain causation," European Journal of Law and Economics, Springer, pages 133-148.
    13. Anna Alberini & David Austin, 2002. "Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases," The Review of Economics and Statistics, MIT Press, pages 729-741.
    14. Austin, David & Alberini, Anna, 2001. "Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases," Discussion Papers dp-01-06, Resources For the Future.
    15. Sam, Abdoul G., 2009. "Impact of Government-Sponsored Pollution Prevention Practices on Environmental Compliance and Enforcement: Evidence from a Sample of US Manufacturing Facilities," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49306, Agricultural and Applied Economics Association.
    16. Abdoul Sam, 2010. "Impact of government-sponsored pollution prevention practices on environmental compliance and enforcement: evidence from a sample of US manufacturing facilities," Journal of Regulatory Economics, Springer, pages 266-286.
    17. Alm, James & Shimshack, Jay, 2014. "Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings," Foundations and Trends(R) in Microeconomics, now publishers, vol. 10(4), pages 209-274, December.
    18. Robert Innes & Abdoul G. Sam, 2008. "Voluntary Pollution Reductions and the Enforcement of Environmental Law: An Empirical Study of the 33/50 Program," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 271-296, May.
    19. Bhole, Bharat & Wagner, Jeffrey, 2008. "The joint use of regulation and strict liability with multidimensional care and uncertain conviction," International Review of Law and Economics, Elsevier, vol. 28(2), pages 123-132, June.

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