Competition Makes Inspectors More Lenient: Evidence from the Motor Vehicle Inspection Market

Osmis Habte () and Hakan Holm
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Osmis Habte: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden, https://sites.google.com/view/osmisaredahabte/home

No 2017:19, Working Papers from Lund University, Department of Economics

Abstract: We examine the impact of competition on firms' leniency towards their customers in a heavily regulated market, which is consciously designed to mitigate incentives to deviate from the regulation. Using a panel data set representing 22.5 million periodic vehicle roadworthiness tests during the period 2010-2015, we show that inspection stations operating in more competitive markets are more lenient to their customers than stations operating in less competitive markets. We present both fixed effects and instrumental variable estimates of the effect of competition on firms' incentive to be lenient to their customers.

Keywords: leniency; pass rate; inspection behavior; competition; deregulation; inspection market (search for similar items in EconPapers)
JEL-codes: D22 L11 L84 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017-12-22
New Economics Papers: this item is included in nep-com, nep-ind and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Competition Makes Inspectors More Lenient: Evidence from the Motor Vehicle Inspection Market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2017_019

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