Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases

David Austin () and Anna Alberini

RFF Working Paper Series from Resources for the Future

Abstract: Proponents of environmental policies based on liability assert that strict liability imposed on the polluter will induce firms to handle hazardous wastes properly and to avoid disposing them into the environment. Economic theory and a few well-publicized cases, however, suggest that a number of factors may dilute the incentives posed by strict liability. In this paper, the authors run regressions relating unintended releases of pollution into the environment (aggregated at the state level, and followed over nine years from 1987 to 1995) to the imposition of strict liability on the polluter, exploiting variation across states in the liability provisions of their mini-Superfund laws, and in the years these were adopted. The authors experiment with instrumental variable estimation, fixed effects, and endogenous switching, and find that only after they explicitly model the endogeneity of states' liability laws is strict liability seen as reducing the seriousness of spills and releases. They also find evidence consistent with the notion that under strict liability, firms may spin off into, or delegate riskier production processes to, smaller firms, which are partially sheltered from liability. This tendency appears to be widespread.

Keywords: strict liability; negligence; hazardous waste; state environmental policy; endogenous policy adoption (search for similar items in EconPapers)
JEL-codes: D72 K13 Q28 (search for similar items in EconPapers)
Date: 1999-03-01
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases (2002)
Working Paper: Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases (2001)
Working Paper: Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases (2001)
Working Paper: Accidents Waiting to Happen: Liability Policy and Toxic Pollution Releases (1999)
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