The Harrington Paradox Squared
Harrington (1988) shows that state-dependent enforcement based on past compliance records provides an explanation to the seemingly contradictory observation that firms' compliance with environmental regulations is high despite the fact that inspections occur infrequently and fines are rare and small. This result has been labeled in the literature as the "Harrington paradox". In this paper we propose an improved transition structure for the audit framework where targeting is based not only on firms' past compliance record but also on adoption of environmentally superior technologies. We show that this transition structure would not only foster the adoption of new technology but also increase deterrence by changing the composition of firms in the industry toward an increased fraction of cleaner firms that pollute and violate less.
|Date of creation:||Jan 2015|
|Contact details of provider:|| Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden|
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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- Millock, Katrin & Sunding, David & Zilberman, David, 2002.
"Regulating Pollution with Endogenous Monitoring,"
Journal of Environmental Economics and Management,
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- 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, vol. 5(1), pages 3-24, Winter.
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