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When and Why Do Plants Comply? Paper Mills in the 1980s

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  • Wayne B. Gray
  • Ronald J. Shadbegian

Abstract

This paper examines differences in compliance with air pollution regulation for U.S. pulp and paper mills. Our analysis is based on confidential, plant-level Census data from the Longitudinal Research Database for 116 pulp and paper mills, covering the 1979-1990 period. The LRD provides us with data on shipments, investment, productivity, age, and production technology. We also have plant-level pollution abatement expenditures from the Pollution Abatement Costs and Expenditures (PACE) survey. Using ownership data, we link in firm-level financial data taken from Compustat, identifying firm size and profitability. Finally, we use several regulatory data sets. From EPA, the Compliance Data System provides measures of air pollution enforcement activity and compliance status during the period, while the Permit Compliance System and the Toxic Release Inventory provide information on other pollution media. OSHA's Integrated Management Information System provides data on OSHA enforcement and compliance. Anticipating our results we find significant effects of some plant characteristics on compliance rates: plants which include a pulping process, which are older, and which are larger are all less likely to be in compliance. Compliance also seems to be correlated across media: plants violating water pollution or OSHA regulations are more likely to violate air pollution regulations. Firm-level characteristics are not significant determinants of compliance rates. Furthermore, once we control for the endogeneity of regulatory enforcement, we find the expected positive relationship between enforcement and compliance. We also find some differences across plants and firms in their responsiveness to enforcement. Pulp mills, already less likely to be in compliance, are also less sensitive to inspections. Some firm characteristics also matter here: plants owned by larger firms, whether measured in terms of their employment or by the number of other paper mills they own, are less sensitive to inspections and more sensitive to other enforcement actions, consistent with our expectations and with other researcher's results.

Suggested Citation

  • Wayne B. Gray & Ronald J. Shadbegian, 2004. "When and Why Do Plants Comply? Paper Mills in the 1980s," NCEE Working Paper Series 200407, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jul 2004.
    • Handle: RePEc:nev:wpaper:wp200407
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    References listed on IDEAS

    as
    1. Gray, Wayne B. & Shadbegian, Ronald J., 2003. "Plant vintage, technology, and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 384-402, November.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    3. Wayne B Gray & Ronald J Shadbegian, 1994. "Pollution Abatement Costs, Regulation And Plant-Level Productivity," Working Papers 94-14, Center for Economic Studies, U.S. Census Bureau.
    4. Scholz, John T & Gray, Wayne B, 1990. "OSHA Enforcement and Workplace Injuries: A Behavioral Approach to Risk Assessment," Journal of Risk and Uncertainty, Springer, vol. 3(3), pages 283-305, September.
    5. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July.
    6. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    7. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-674, August.
    8. Robert H Mcguckin & George A Pascoe, 1988. "The Longitudinal Research Database (LRD): Status And Research Possibilities," Working Papers 88-2, Center for Economic Studies, U.S. Census Bureau.
    9. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
    10. Bartel, Ann P & Thomas, Lacy Glenn, 1985. "Direct and Indirect Effects of Regulation: A New Look at OSHA's Impact," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 1-25, April.
    11. Magat, Wesley A & Viscusi, W Kip, 1990. "Effectiveness of the EPA's Regulatory Enforcement: The Case of Industrial Effluent Standards," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 331-360, October.
    12. Eric Helland, 1998. "The Enforcement Of Pollution Control Laws: Inspections, Violations, And Self-Reporting," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 141-153, February.
    13. Deily, Mary E. & Gray, Wayne B., 1991. "Enforcement of pollution regulations in a declining industry," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 260-274, November.
    14. Nadeau, Louis W., 1997. "EPA Effectiveness at Reducing the Duration of Plant-Level Noncompliance," Journal of Environmental Economics and Management, Elsevier, vol. 34(1), pages 54-78, September.
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    Cited by:

    1. Martin T. Ross & Michael P. Gallaher & Brian C. Murray & Wanda W. Throneburg & Arik Levinson, 2004. "PACE Survey: Background, Applications, and Data Quality Issues," NCEE Working Paper Series 200409, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jul 2004.
    2. 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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