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When threats become credible: A natural experiment of environmental enforcement from Florida

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  • Blundell, Wesley

Abstract

Environmental regulators often use dynamic enforcement, which bases penalties and enforcement effort on plants' past compliance history, to improve compliance and decrease emissions when enforcement resources are limited. Using plant-level data from the Environmental Protection Agency (EPA), I examine an unexpected shift in the use of traditional enforcement by environmental regulators in Florida, showing that all of the state's plants decreased emissions and improved compliance following an increase in penalties for those with Priority Violations. The largest improvements were observed among plants with the highest expected costs of compliance, which is consistent with the theory of dynamic enforcement. These results are robust to the use of control plants from nearby southern states, as well as control plants selected via a matching algorithm. The paper's findings (1) provide quasi-experimental evidence on the effectiveness of traditional enforcement actions, and (2) suggest that dynamic incentives may matter for plant compliance decisions.

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  • Blundell, Wesley, 2020. "When threats become credible: A natural experiment of environmental enforcement from Florida," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:jeeman:v:101:y:2020:i:c:s009506961830740x
    DOI: 10.1016/j.jeem.2019.102288
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    Cited by:

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    2. Matthew P. Makofske, 2024. "Disclosure policy design and regulatory agent behavior," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(1), pages 118-144, January.
    3. Kastoryano, Stephen & Vollaard, Ben, 2023. "Unseen annihilation: Illegal fishing practices and nautical patrol," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    4. Lindeboom, Maarten & van der Klaauw, Bas & Vriend, Sandra, 2020. "Audit regimes in long-term care," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 272-298.
    5. Makofske, Matthew Philip, 2021. "Spoiled food and spoiled surprises: Inspection anticipation and regulatory compliance," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 348-365.
    6. Michael Gmeiner & Robert Gmeiner, 2022. "Regulation Enforcement," Journal of Labor Research, Springer, vol. 43(2), pages 163-202, June.
    7. Shimshack, Jay P. & Ward, Michael B., 2022. "Costly sanctions and the treatment of frequent violators in regulatory settings," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    8. Balietti, Anca & Zeising, Tom, 2024. "Racial Disparities in Environmental Auditing," Working Papers 0745, University of Heidelberg, Department of Economics.
    9. Pan, Junyu & Du, Lizhao & Wu, Haitao & Liu, Xiaoqian, 2024. "Does environmental law enforcement supervision improve corporate carbon reduction performance? Evidence from environmental protection interview," Energy Economics, Elsevier, vol. 132(C).
    10. Chengqing Liu & Dan Yang & Jun Sun & Yu Cheng, 2023. "The Impact of Environmental Regulations on Pollution and Carbon Reduction in the Yellow River Basin, China," IJERPH, MDPI, vol. 20(3), pages 1-21, January.
    11. Wesley Blundell & Gautam Gowrisankaran & Ashley Langer, 2020. "Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations," American Economic Review, American Economic Association, vol. 110(8), pages 2558-2585, August.
    12. Brice Foulon & Sylvain Marsat, 2023. "Does environmental footprint influence the resilience of firms facing environmental penalties?," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 6154-6168, December.
    13. Engel, Christoph & Zamir, Eyal, 2024. "Is transparency a blessing or a curse? An experimental horse race between accountability and extortionary corruption," International Review of Law and Economics, Elsevier, vol. 78(C).
    14. Makofske, Matthew, 2024. "Anticipated Monitoring, Inhibited Detection, and Diminished Deterrence," MPRA Paper 120044, University Library of Munich, Germany.

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