The Impact of Sanctions and Inspections on Firms’ Environmental Compliance Decisions

Sandra Rousseau

Energy, Transport and Environment Working Papers Series from KU Leuven, Department of Economics - Research Group Energy, Transport and Environment

Abstract: Firms’ compliance decisions are expected to be strongly influenced by the expected fine for non-compliance with environmental regulations. In this paper we measure the effect of the probability of inspection and the size of the fine – jointly and separately – on the compliance decisions made by textile firms in Flanders. The results confirm the deterrence effect of increasing inspections, but they do not support a similar finding for monetary sanctions. The low levels of the sanctions that courts levy and the rapidly increasing marginal abatement costs imply that firms’ compliance decisions are not positively affected by the imposed penalties. However, we do find that it might be welfare enhancing to occasionally scan a selection of firms or sectors more deeply since the number of detected violations raises significantly as a consequence.

Keywords: Monitoring and enforcement; environmental regulations; textile sector (search for similar items in EconPapers)
Pages: 30 pages
Date: 2007-09
New Economics Papers: this item is included in nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ete:etewps:ete0704

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