Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations

Abstract

The U.S. Environmental Protection Agency uses a dynamic approach to environmental enforcement for air pollution, with repeat offenders subject to high fines and designation as high priority violators (HPV). We estimate the benefits of dynamic monitoring and enforcement by developing and estimating a dynamic model of a plant and regulator, where plants decide when to invest in pollution abatement technologies. We use a fixed grid approach to estimate random coefficient specifications. Investment, fines, and HPV designation are very costly to most plants. Eliminating dynamic enforcement would have large adverse impacts on the number of high priority violators and pollutants emitted.

JEL Codes: Q53, Q58, C57

Keywords: monitoring and compliance, pollution, investment, dynamic estimation, Clean Air Act

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Presenter

Presented by Professor Gautam Gowrisankaran, University of Arizona.

Further information

While here, Professor Gautam Gowrisankaran will be using room 633 Colin Clark building. If you would like to meet with Professor Gowrisankaran or have lunch or dinner with him please contact Dr Dong-Hyuk Kim who will be his host while at The University of Queensland.