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Firms’ Compliance to Environmental Regulation: Is There Really a Paradox?

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  • Karine Nyborg
  • Kjetil Telle

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Abstract

It has often been claimed that firms’ compliance to environmental regulations is higher than predicted by standard theory, a result labeled the “Harrington paradox” in the literature. Enforcement data from Norway presented here appears, at first glance, to confirm this “stylized fact”: firms are inspected less than once a year, detected violators are seldom fined, but still, serious violations seem relatively rare. However, at a closer look, the pattern seems less paradoxical: enforcement of minor violations is lax, but such violations do flourish; serious violations, on the other hand, are subject to credible threats of harsh punishment, and such violations are more uncommon. This seems quite consistent with predictions from standard theory. We argue that the empirical existence of the Harrington paradox is not well documented in the international literature. The claim that firms’ compliance with environmental regulations is generally higher than predicted by standard theory should thus be regarded as a hypothesis rather than an established fact. Copyright Springer Science+Business Media, Inc. 2006

Suggested Citation

  • Karine Nyborg & Kjetil Telle, 2006. "Firms’ Compliance to Environmental Regulation: Is There Really a Paradox?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(1), pages 1-18, September.
  • Handle: RePEc:kap:enreec:v:35:y:2006:i:1:p:1-18
    DOI: 10.1007/s10640-006-9001-7
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    Citations

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    Cited by:

    1. Kjetil Telle, 2012. "Monitoring and enforcement of environmental regulations. Lessons from a natural field experiment in Norway," Discussion Papers 680, Statistics Norway, Research Department.
    2. Timo Goeschl & Johannes Jarke, 2013. "The warnings puzzle: an upstream explanation," Journal of Regulatory Economics, Springer, vol. 44(3), pages 339-360, December.
    3. Brita Bye & Marit E. Klemetsen, 2014. "The impacts of alternative policy instruments on environmental performance. A firm level study of temporary and persistent effects," Discussion Papers 788, Statistics Norway, Research Department.
    4. Sarah Stafford, 2013. "How predictable are environmental compliance inspections?," Journal of Regulatory Economics, Springer, vol. 44(3), pages 361-388, December.
    5. Kjetil Telle, 2009. "The threat of regulatory environmental inspection: impact on plant performance," Journal of Regulatory Economics, Springer, vol. 35(2), pages 154-178, April.
    6. Jessica Coria & Xiao-Bing Zhang, 2015. "State-Dependent Enforcement to Foster the Adoption of New Technologies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 359-381, October.
    7. Telle, Kjetil, 2013. "Monitoring and enforcement of environmental regulations," Journal of Public Economics, Elsevier, vol. 99(C), pages 24-34.
    8. Holstein, Fredrik & Gren, Ing-Marie, 2013. "Violation of environmental regulations in Sweden: Economic motives, environmental attitudes, and social capital," Working Paper Series 2013:3, Swedish University of Agricultural Sciences, Department Economics.
    9. Holstein, Fredrik, 2009. "Environmental values - what’s the point?," Department of Economics publications 2205, Swedish University of Agricultural Sciences, Department of Economics.
    10. Rousseau, Sandra & Telle, Kjetil, 2010. "On the existence of the optimal fine for environmental crime," International Review of Law and Economics, Elsevier, vol. 30(4), pages 329-337, December.
    11. Suurmond, Guido, 2007. "The effects of the enforcement strategy," MPRA Paper 21142, University Library of Munich, Germany.
    12. Coria, Jessica & Zhang, Xiao-Bing, 2015. "The Harrington Paradox Squared," Working Papers in Economics 608, University of Gothenburg, Department of Economics.
    13. Rousseau, Sandra, 2009. "The use of warnings in the presence of errors," International Review of Law and Economics, Elsevier, vol. 29(3), pages 191-201, September.

    More about this item

    Keywords

    compliance; enforcement; environmental performance; Harrington paradox; K32; K42; Q28; L51;

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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    This item is featured on the following reading lists or Wikipedia pages:
    1. Harrington paradox in Wikipedia English ne '')
    2. Harrinqton paradoksu in Wikipedia Azerbaijani ne '')

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