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Costly sanctions and the treatment of frequent violators in regulatory settings

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  • Jay P. Shimshack

    (University of Virginia, Batten School)

  • Michael B. Ward

    (Monash University, Department of Economics, Monash Business School)

Abstract

Regulators typically treat frequent violators more harshly. When does such harsh treatment maximize overall compliance? We consider the role of two factors: responsiveness to penalties and costs of sanctions. A novel insight is that maintaining a credible threat of sanction against infrequent violators is relatively cheap because that threat seldom needs to be backed up. In a Clean Water Act application, the marginal sanction deters ten times as many violations when directed at infrequent violators. On net, this difference is due to a sanction cost effect, not because infrequent violators are marginally more responsive to the threat of punishment.

Suggested Citation

  • Jay P. Shimshack & Michael B. Ward, 2022. "Costly sanctions and the treatment of frequent violators in regulatory settings," Monash Economics Working Papers 2022-20, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2022-20
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    1. Lu, Juan & Li, He & Yang, Ran, 2024. "Effects of environmental liability insurance on illegal pollutant discharge of heavy polluting enterprises: Emission reduction incentives or pollution protector?," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).

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    More about this item

    Keywords

    Enforcement; Repeat Offender; Compliance; Government Expenditures;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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