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Enforcement Missions: Targets vs Budgets

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  • Heyes, Anthony
  • Kapur, Sandeep

Abstract

Enforcement of policy is typically delegated. What sort of mission should the head of an enforcement program be given? When there is more than one firm being regulated their compliance decisions - otherwise completely separate - become linked in a way that depends on that mission. Under some sorts of missions firms compete to avoid the attention of the enforcer by competitive reductions in the extent of their non-compliance. Under others the interaction pushes in the opposite direction. We develop a general model or enforcement spillovers that allows for the ordering of some typical classes of missions. We find that in plausible settings 'target-driven' missions (that set a hard emissions target and flexible budget) achieve the same outcome at lower cost than 'budget-driven' ones (that fix budget). Inspection of some fixed fraction of firms is never optimal.

Suggested Citation

  • Heyes, Anthony & Kapur, Sandeep, 2007. "Enforcement Missions: Targets vs Budgets," Working Paper Series 3975, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
  • Handle: RePEc:vuw:vuwcsr:3975
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    Cited by:

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    2. Mary F. Evans & Scott M. Gilpatric & Jay P. Shimshack, 2018. "Enforcement Spillovers: Lessons from Strategic Interactions in Regulation and Product Markets," Journal of Law and Economics, University of Chicago Press, vol. 61(4), pages 739-769.
    3. Arguedas, Carmen & Rousseau, Sandra, 2012. "Learning about compliance under asymmetric information," Resource and Energy Economics, Elsevier, vol. 34(1), pages 55-73.
    4. Earnhart, Dietrich & Friesen, Lana, 2017. "The Effects of Regulated Facilities' Perceptions About the Effectiveness of Government Interventions on Environmental Compliance," Ecological Economics, Elsevier, vol. 142(C), pages 282-294.
    5. Arguedas, Carmen & Rousseau, Sandra, 2009. "A note on the complementarity of uniform emission standards and monitoring strategies," Working Papers 2009/12, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    6. Earnhart, Dietrich & Friesen, Lana, 2021. "Use of competitive endogenous audit mechanisms by federal and state inspectors within environmental protection agencies," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    7. 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.
    8. Colson, Gregory & Menapace, Luisa, 2012. "Multiple receptor ambient monitoring and firm compliance with environmental taxes under budget and target driven regulatory missions," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 390-401.
    9. Herzing, Mathias, 2021. "Multiple equilibria in the context of inspection probabilities depending on firms’ relative emissions," Resource and Energy Economics, Elsevier, vol. 63(C).
    10. 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.

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