The Effects of Regulated Facilities' Perceptions About the Effectiveness of Government Interventions on Environmental Compliance

Our study explores the effects of regulatory monitoring and enforcement activities on facilities' compliance with environmental regulatory laws. In particular, our study examines regulated facilities' perceptions of the effectiveness of monitoring and enforcement efforts for inducing compliance and the influence of these perceptions on facilities' responses to actual inspections and enforcement actions. No previous study explores this influence. For our conceptual analysis, we extend standard deterrence theory by incorporating the behavioral dimension of intrinsic motivation. For our empirical analysis, we examine chemical manufacturing facilities permitted under the Clean Water Act during the years 2002 to 2004. Using an original survey, we collect data on facilities' perceptions. We then compare responses to government interventions between facilities that perceive enforcement as effective and those that do not. For facilities perceiving enforcement as effective, increased deterrence of any type generates little gain. In contrast, for those facilities who perceive enforcement as ineffective, increased deterrence from inspections improves compliance with the Clean Water Act.