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State-Dependent Enforcement to Foster the Adoption of New Technologies

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  • Jessica Coria
  • Xiao-Bing Zhang

Abstract

Harrington (J Public Econ 37:29–53, 1988 ) shows that a suitable strategy for regulators to make enforcement more efficient is to target surveillance resources according to past compliance records. Such scheme generates enforcement leverage as non-compliance triggers greater future scrutiny increasing the expected costs of non-compliance beyond the avoidance of immediate fines. In this paper, we propose an improved transition structure for the audit framework, in which targeting is based not only on firms’ past compliance record but also on adoption of environmentally superior technologies. We show that this transition structure would not only foster the adoption of new technology but also increase deterrence by changing the composition of firms in the industry toward an increased fraction of cleaner firms that pollute and violate less. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Jessica Coria & Xiao-Bing Zhang, 2015. "State-Dependent Enforcement to Foster the Adoption of New Technologies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 359-381, October.
    • Handle: RePEc:kap:enreec:v:62:y:2015:i:2:p:359-381
    DOI: 10.1007/s10640-015-9943-8
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    More about this item

    Keywords

    Imperfect compliance; State-dependent targeted enforcement; Technology adoption; Emission standards; L51; Q55; K31; K42;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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