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Analysis of Firm Compliance with Multiple Environmental Regulations

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  • Lirong Liu

    () (Department of Economics and International Business, Sam Houston State University)

Abstract

When a firm is regulated under multiple environmental programs, its compliance behavior under these programs can be complementary or substituting—regulations of one program either increase or decrease firm compliance with other programs. This paper examines the existence and the nature of such cross program effects. A panel data model with panel corrected standard error (PCSE) is estimated using data on facilities regulated under both the air program (Clean Air Act, CAA) and the hazardous waste program (Reservation and Conservation Recovery Act, RCRA). Results show evidence of negative cross program effects of RCRA regulations on facility compliance with CAA. Increases in RCRA inspections and RCRA penalties as well as the threat of an RCRA inspection result in facilities complying less with CAA regulations. Furthermore, facilities that are regulated under other programs such as Toxic Release Inventory (TRI) and Clean Water Act (CWA) show less compliance than other facilities. Positive withinprogram effects are found, with the threat of a CAA inspection and actual CAA penalty imposing positive effects on CAA compliance. In addition, unemployment rates are negatively related to compliance while population density is positively related to compliance.

Suggested Citation

  • Lirong Liu, 2012. "Analysis of Firm Compliance with Multiple Environmental Regulations," Working Papers 1207, Sam Houston State University, Department of Economics and International Business.
  • Handle: RePEc:shs:wpaper:1207
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    File URL: http://www.shsu.edu/academics/economics-and-international-business/documents/wp_series/wp12-07_paper.pdf
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    References listed on IDEAS

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    8. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
    9. Dietrich Earnhart, 2004. "The Effects of Community Characteristics on Polluter Compliance Levels," Land Economics, University of Wisconsin Press, vol. 80(3), pages 408-432.
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    11. Decker, Christopher S. & Pope, Christopher R., 2005. "Adherence to environmental law: the strategic complementarities of compliance decisions," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 641-661, September.
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