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Regulator reputation, enforcement, and environmental compliance

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  • Shimshack, Jay P.
  • Ward, Michael B.

Abstract

This paper explores empirically the impact of enforcement efforts on environmental compliance, focusing on the role of regulator reputation spillover effects. We find that, on the margin, the impact of a fine for water pollutant violations is about a two-thirds reduction in the statewide violation rate in the year following a fine. This large result obtains through the regulator’s enhanced reputation; the deterrence impact on other plants in a state is almost as strong as the impact on the sanctioned plant. Focusing only on the response of the sanctioned plant, as in previous studies, may therefore seriously underestimate the efficacy of fines and other sanctions. This paper also examines the relative effectiveness of monitoring and enforcement instruments. Non-monetary sanctions contribute no detected impact on compliance, and the marginal fine induces substantially greater compliance than the marginal inspection.
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Suggested Citation

  • Shimshack, Jay P. & Ward, Michael B., 2005. "Regulator reputation, enforcement, and environmental compliance," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 519-540, November.
    • Handle: RePEc:eee:jeeman:v:50:y:2005:i:3:p:519-540
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    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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