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The Desirability of Forgiveness in Regulatory Enforcement

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  • Arun Malik

    (Department of Economics/Institute for International Economic Policy, George Washington University)

Abstract

I present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a firms compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a firms compliance activities constitutes sufficiently strong evidence of the firm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the firm needs to be monitored. If fines are costly, a further benefit is a reduction in fine costs.

Suggested Citation

  • Arun Malik, 2008. "The Desirability of Forgiveness in Regulatory Enforcement," Working Papers 2008-14, The George Washington University, Institute for International Economic Policy.
    • Handle: RePEc:gwi:wpaper:2008-14
    as

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    File URL: http://www.gwu.edu/~iiep/assets/docs/papers/Malik_IIEPWP2008-14.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    enforcement of regulation; selective enforcement; forgiving noncompliance;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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