Monitoring, Firm Compliance, and Imposition of Fines:Evidence from the Federal Industrial Inspection Program in Mexico City

Ninel Escobar ()
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Ninel Escobar: Universidad de Concepción

No 201120, Working Papers from Latin American and Caribbean Environmental Economics Program

Abstract: We analyzed the performance of the Federal Industrial Inspection Program operated by the Federal Attorney for Environmental Protection (PROFEPA) in Mexico City. We seek to answer three questions: What drives inspections? What determines non-compliance? And what drives imposition of fines? We used firm-level data which identifies certain characteristics of the firms, PROFEPA’s inspections, compliance results and fines for all air polluting sources under the program during the period January 2000-October 2008. We identified four main results. First, PROFEPA has focused on larger firms in certain industrial sectors, and located in poor and dense municipalities. Second, inspections triggered by citizen complaints had greater chance of identifying serious infractions. Third, past fines were significant in inducing future compliance but have a small marginal effect. Fourth, the seriousness of infractions was not a relevant variable in the decision whether or not to impose a fine, but it was relevant to the amount of the fine if any was imposed.

Pages: 45 pages
Date: 2011, Revised 2011
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