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The Harrington Paradox Squared

Author

Listed:
  • Coria, Jessica

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Zhang, Xiao-Bing

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

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.

Suggested Citation

  • Coria, Jessica & Zhang, Xiao-Bing, 2015. "The Harrington Paradox Squared," Working Papers in Economics 608, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0608
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    File URL: https://gupea.ub.gu.se/handle/2077/38072
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    References listed on IDEAS

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    More about this item

    Keywords

    imperfect compliance; state-dependent targeted enforcement; technology adoption; emission standards;
    All these keywords.

    JEL classification:

    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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