IDEAS home Printed from
   My bibliography  Save this article

Emission Standards and Monitoring Strategies in a Hierarchical Setting


  • Carmen Arguedas

    () (Universidad Autónoma de Madrid)

  • Sandra Rousseau

    (Faculty of Economics and Business, CEDON)


Abstract In this paper, we consider a hierarchical model of environmental regulation and enforcement to study the standard setting decision made by a national regulator and the monitoring decision made by a local enforcement agency. The problem is interesting due to differences in both available information and objectives at local and national levels. Generally, the national regulator is less informed than the local agency about the characteristics of the polluting agents. This leads to the use of uniform standards and the delegation of the enforcement activity to the local agency. On the one hand, the local agency partially corrects for the inefficiency caused by uniform standards by setting a differentiated inspection strategy. On the other hand, the level of the standard is distorted to partially correct for the inefficiency caused by the divergence between national and local objectives. The interactions between local and national decisions are influenced by the size of the divergence in objectives and the level of environmental damages.

Suggested Citation

  • Carmen Arguedas & Sandra Rousseau, 2015. "Emission Standards and Monitoring Strategies in a Hierarchical Setting," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(3), pages 395-412, March.
  • Handle: RePEc:kap:enreec:v:60:y:2015:i:3:d:10.1007_s10640-014-9772-1
    DOI: 10.1007/s10640-014-9772-1

    Download full text from publisher

    File URL:
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Bucovetsky, S. & Marchand, M. & Pestieau, P., 1998. "Tax Competition and Revelation of Preferences for Public Expenditure," Journal of Urban Economics, Elsevier, vol. 44(3), pages 367-390, November.
    2. Heyes, Anthony & Kapur, Sandeep, 2009. "Enforcement missions: Targets vs budgets," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 129-140, September.
    3. Cohen, Mark A, 1987. "Optimal Enforcement Strategy to Prevent Oil Spills: An Application of a Principal-Agent Model with Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 23-51, April.
    4. Horst Raff & John Wilson, 1997. "Income Redistribution with Well-Informed Local Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 407-427, November.
    5. Stranlund, John K. & Dhanda, Kanwalroop Kathy, 1999. "Endogenous Monitoring and Enforcement of a Transferable Emissions Permit System," Journal of Environmental Economics and Management, Elsevier, vol. 38(3), pages 267-282, November.
    6. Arguedas, Carmen & Rousseau, Sandra, 2012. "Learning about compliance under asymmetric information," Resource and Energy Economics, Elsevier, vol. 34(1), pages 55-73.
    7. Inés Macho-Stadler & David Pérez-Castrillo, 2010. "Optimal monitoring to implement clean technologies when pollution is random," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(3), pages 277-304, July.
    8. Cornes, Richard C. & Silva, Emilson C. D., 2000. "Local Public Goods, Risk Sharing, and Private Information in Federal Systems," Journal of Urban Economics, Elsevier, vol. 47(1), pages 39-60, January.
    9. Makkai, Toni & Braithwaite, John, 1992. "In and Out of the Revolving Door: Making Sense of Regulatory Capture," Journal of Public Policy, Cambridge University Press, vol. 12(01), pages 61-78, January.
    10. Franckx, Laurent, 2002. "The Use of Ambient Inspections in Environmental Monitoring and Enforcement When the Inspection Agency Cannot Commit Itself to Announced Inspection Probabilities," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 71-92, January.
    11. Saha, Atanu & Poole, Graham, 2000. "The economics of crime and punishment: An analysis of optimal penalty," Economics Letters, Elsevier, vol. 68(2), pages 191-196, August.
    12. Muehlenbachs, Lucija & Staubli, Stefan & Cohen, Mark A., 2013. "The Effect of Inspector Group Size and Familiarity on Enforcement and Deterrence," IZA Discussion Papers 7876, Institute for the Study of Labor (IZA).
    13. Garvie, Devon & Keeler, Andrew, 1994. "Incomplete enforcement with endogenous regulatory choice," Journal of Public Economics, Elsevier, vol. 55(1), pages 141-162, September.
    14. Andrew Keeler, 1995. "Regulatory objectives and enforcement behavior," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(1), pages 73-85, July.
    15. Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.
    16. Carmen Arguedas, 2008. "To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(2), pages 155-168, October.
    17. Harford, Jon D. & Harrington, Winston, 1991. "A reconsideration of enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 45(3), pages 391-395, August.
    18. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    19. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    20. 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.
    21. Jeremy Firestone, 2002. "Agency governance and enforcement: the influence of mission on environmental decisionmaking," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(3), pages 409-426.
    22. Jones, Carol Adaire & Scotchmer, Suzanne, 1990. "The social cost of uniform regulatory standards in a hierarchical government," Journal of Environmental Economics and Management, Elsevier, vol. 19(1), pages 61-72, July.
    23. Grieson, Ronald E. & Singh, Nirvikar, 1990. "Regulating externalities through testing," Journal of Public Economics, Elsevier, vol. 41(3), pages 369-387, April.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Carmen Arguedas & Dietrich Earnhart & Sandra Rousseau, 2017. "Non-uniform implementation of uniform standards," Journal of Regulatory Economics, Springer, vol. 51(2), pages 159-183, April.
    2. Sabine Aresin, 2015. "Monitoring Abatement in the Presence of an Import Quota on CERs," Working Papers tax-mpg-rps-2015-11, Max Planck Institute for Tax Law and Public Finance.

    More about this item


    Pollution standards; Monitoring; Non-compliance;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:60:y:2015:i:3:d:10.1007_s10640-014-9772-1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.