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Can Learning Explain Deterrence? Evidence from Oil and Gas Production

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  • Peter Maniloff

Abstract

This paper tests a learning model of regulatory deterrence. Firms exert compliance effort based on their belief about a regulator’s effort level at detecting violations. Firms use regulatory actions to learn about the regulator and update their own compliance efforts accordingly. This theoretical model suggests that deterrence will decrease with experience. Econometric analysis of inspections of Pennsylvania oil and gas wells supports the model. Econometric results show that inexperienced firms are substantially more deterred than experienced firms. These results are robust to regulatory targeting in inspections and different measures of experience and deterrence.

Suggested Citation

  • Peter Maniloff, 2019. "Can Learning Explain Deterrence? Evidence from Oil and Gas Production," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(5), pages 853-881.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/704282
    DOI: 10.1086/704282
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    Cited by:

    1. Backstrom, Jesse, 2019. "Strategic Reporting and the Effects of Water Use in Hydraulic Fracturing on Local Groundwater Levels in Texas," Center for Growth and Opportunity at Utah State University 307177, Center for Growth and Opportunity.
    2. Walter, Jason & Raff, Zach, 2019. "When the regulator goes home: The effectiveness of environmental oversight," MPRA Paper 94158, University Library of Munich, Germany.
    3. Dietrich Earnhart & Nathan P. Hendricks, 2023. "Adapting to water restrictions: Intensive versus extensive adaptation over time differentiated by water right seniority," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(5), pages 1458-1490, October.
    4. Maniloff, Peter & Kaffine, Daniel T., 2021. "Private monitoring and public enforcement: Evidence from complaints and regulation of oil and gas wells," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    5. Thomas J. Miceli & Kathleen Segerson & Dietrich Earnhart, 2022. "The role of experience in deterring crime: A theory of specific versus general deterrence," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1833-1853, October.
    6. Rijal, Binish & Khanna, Neha, 2020. "High priority violations and intra-firm pollution substitution," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).

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