Pollution Standards, Costly Monitoring and Fines

Carmen Arguedas ()

No 2005-9, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: We investigate the features of optimal regulatory policies composed of pollution standards and probabilities of inspection, where fines for non-compliance depend not only on the degree of violation but alson on nongravity factors.We show that optimal policies can induce either compliance or noncompliance with the standards, the latter being more plausible when monitoring costs are large and, surprisingly, when gravity-based fines are large.Also, both tghe convexity of the sanctions and the level of the non-gravity-based penalties play a key role as to whether optimal policies induce noncompliance.

JEL-codes: D82 K32 K42 L51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-env, nep-law and nep-res
Date: 2005
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