A dissolving paradox: Firms’ compliance to environmental regulation

Karine Nyborg and Kjetil Telle

No 02/2004, Memorandum from Oslo University, Department of Economics

Abstract: It has often been claimed that firms’ compliance to environmental regulations is higher than predicted by standard theory, a result labeled the “Harrington paradox” in the literature. Enforcement data from Norway presented here appears, at first glance, to confirm this “stylized fact”: Firms are inspected less than once a year, detected violators are seldom fined, but still, serious violations seem relatively rare. However, at a closer look, the paradox dissolves: Enforcement of minor violations is lax, but such violations do flourish; serious violations are more uncommon, but such violations are subject to credible threats of harsh punishment. This seems quite consistent with predictions from standard theory. Although our finding may of course apply to Norway only, we argue that the empirical existence of the Harrington paradox is not well documented in the literature. Hence, the claim that firms’ compliance with environmental regulations is higher than predicted by standard theory should be viewed with skepticism.

Keywords: Environmental performance; compliance; enforcement; Harrington paradox (search for similar items in EconPapers)
JEL-codes: K32 K42 L51 Q28 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-02-04
New Economics Papers: this item is included in nep-env and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Environmental and Resource Economics, 2006, pages 1-18.

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