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Do Corporations Profit From Breaking The Law? Evidence From Environmental Violations

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  • Atkinson, Nathan

Abstract

To deter a profit-maximizing corporation from breaking the law, the expected costs from noncompliance must be greater than the expected costs from compliance. In this paper, I examine the costs of corporate compliance and noncompliance with the Clean Air Act. Using the universe of civil Clean Air Act environmental violations by stationary emitters of pollution, I estimate that 37.5% of civil violations are profitable net of penalties imposed. The profitability of noncompliance is increasing in the size of the violation. In aggregate, I estimate that penalties imposed by the EPA would have to be five times greater than those imposed in order to achieve the EPA's stated policy goal of removing the economic benefits of noncompliance. I further show that the firms that profit the most from violations are also the largest emitters of pollution.

Suggested Citation

  • Atkinson, Nathan, 2022. "Do Corporations Profit From Breaking The Law? Evidence From Environmental Violations," SocArXiv jk4r7, Center for Open Science.
    • Handle: RePEc:osf:socarx:jk4r7
    DOI: 10.31219/osf.io/jk4r7
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