Agency Problems in Law Enforcement: Theory and Application to the U.S. Coast Guard
We study two issues in the enforcement of public law. The first is whether the system of inspections and penalties set by the regulator is effective. The second is whether a better system of inspections and penalties can be designed, given the institutional constraints under which the regulator must function. We study these issues in the context of oil spill prevention activities of the U.S. Coast Guard (USCG), the agency entrusted with the enforcement of maritime pollution laws. A theoretically optimal contract that mixes penalties based on the amount of pollution ex post with penalties based on the extent of non- compliance ex ante is derived. The effectiveness of USCG inspections and penalties in reducing oil spills is then econometrically studied using micro-level data on a panel of US flag tank vessels. Whether the optimal penalty can potentially improve the effectiveness of compliance inspections in reducing oil spills is examined in the light of the empirical results and recent developments in the economics and public management literature on effective incentive contracting. Among our findings is the potential for combining unilateral incentive-based methods with cooperative methods based on reciprocity in order to solve the complex problem of law enforcement.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Louis Kaplow & Steven Shavell, 1991. "Optimal Law Enforcement with Self-Reporting of Behavior," NBER Working Papers 3822, National Bureau of Economic Research, Inc.
- Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, vol. 20(2), pages 231-259, April.
- maurice moffett & alok k. bohara & kishore gawande, 2005. "Governance and Performance: Theory-Based Evidence from US Coast Guard Inspections," Public Economics 0505002, EconWPA.
- Epple, Dennis & Visscher, Michael, 1984. "Environmental Pollution: Modeling Occurrence, Detection, and Deterrence," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 29-60, April.
- 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.
- Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
- Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June.
- Cohen, Mark A, 1987. "Optimal Enforcement Strategy to Prevent Oil Spills: An Application of a Principal-Agent Model with Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 23-51, April.
- Ronald A. Dye, 1986. "Optimal Monitoring Policies in Agencies," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 339-350, Autumn.
- James A. Mirrlees, 1976. "The Optimal Structure of Incentives and Authority Within an Organization," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 105-131, Spring.
- Douglas Staiger & James H. Stock, 1994.
"Instrumental Variables Regression with Weak Instruments,"
NBER Technical Working Papers
0151, National Bureau of Economic Research, Inc.
- Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
- Montserrat Grau & Theodore Groves, 1997. "The Oil Spill Process: The Effect of Coast Guard Monitoring on Oil Spills," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(4), pages 315-339, December.
- A. Mitchell Polinsky & Steven Shavell, 1999.
"The Economic Theory of Public Enforcement of Law,"
NBER Working Papers
6993, National Bureau of Economic Research, Inc.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Bengt Holmstrom, 1979.
"Moral Hazard and Observability,"
Bell Journal of Economics,
The RAND Corporation, vol. 10(1), pages 74-91, Spring.
- George Baker, 2000. "The Use of Performance Measures in Incentive Contracting," American Economic Review, American Economic Association, vol. 90(2), pages 415-420, May.
- Canice Prendergast, 2000. "What Trade-Off of Risk and Incentives?," American Economic Review, American Economic Association, vol. 90(2), pages 421-425, May.
- Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
- Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwple:0505001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.