DO CORPORATIONS PROFIT FROM BREAKING THE LAW? EVIDENCE FROM ENVIRONMENTAL VIOLATIONS

Nathan Atkinson

No jk4r7, SocArXiv from Center for Open Science

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.

Date: 2022-07-29
New Economics Papers: this item is included in nep-ene, nep-env and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:jk4r7

DOI: 10.31219/osf.io/jk4r7

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