Leveraged enforcement under the EPA’s High Priority Violation Policy

Lirong Liu () and Zhou Yang ()
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Lirong Liu: Texas A&M University-Commerce
Zhou Yang: Robert Morris University

Empirical Economics, 2020, vol. 58, issue 3, No 15, 1279-1304

Abstract: Abstract In the environmental enforcement literature, leveraged enforcement is an important theoretical model in which firms with current violations are targeted with intensive inspections and sanctions in the future. This paper examines the effects of leveraged enforcement on facility compliance and the differential deterrence effects of enforcement. We focus on the Environmental Protection Agency’s High Priority Violation (HPV) Policy, which represents leveraged enforcement in the regulations of air pollution in the USA. We estimate dynamic panel data models using 8755 major manufacturing facilities in the USA from 2001 to 2010. Our results suggest that being classified as an HPV facility can have significant and positive effects on compliance. We also find general deterrence effects such that a given facility’s compliance rate rises with fines on HPV facilities within the same state. However, the deterrence effects of enforcement differ by HPV status. HPV facilities on average are less responsive to additional enforcement on itself and other facilities.

Keywords: Air pollution regulation; Leveraged enforcement; Targeted enforcement; High Priority Violation Policy; Firm compliance; Clean Air Act (search for similar items in EconPapers)
JEL-codes: D62 Q53 Q58 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s00181-018-1555-z

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