Dietrich Earnhart & Lana Friesen, School of Economics Discussion Paper No. 463 May 2012, School of Economics, The University of Queensland. Australia.


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According to the standard model of enforcement, both the certainty of punishment and the severity of punishment influence deterrence. Discerning the separate effects of these two components on behavior, however, is difficult especially because it requires constructing measures of the beliefs of individuals and regulated businesses. Our study tackles this matter using stated choice scenarios posed to environmental management professionals working at businesses operating within the Clean Water Act regulatory framework. In addition, our study examines the influence of specific deterrence, which reflects individuals’ responses to their own experiences with penalties. As important, our analysis explores the attitudes towards environmental protection held by facility management and facility environmental employees, which collectively reflect the corporate culture surrounding environmental protection efforts. We find that regulated facilities respond to increases in fine size and fine likelihood with equal sensitivity and that both specific deterrence and corporate culture are important determinants of compliance behavior.