Regulatory compliance, information disclosure and peer effects: evidence from the Mexican gasoline market

Xian Liu (), Barrett Kirwan and Andrea Martens
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Xian Liu: Tianjin University of Finance and Economics
Andrea Martens: KU Leuven

Journal of Regulatory Economics, 2018, vol. 54, issue 1, No 4, 53-80

Abstract: Abstract Policy makers and regulators are increasingly interested in the use of information disclosure as a regulatory instrument to improve firms’ behavior. However, little has been done using micro-level data to investigate whether information provision may trigger peer influence among firms that affects their compliance behavior. Using station-level inspection verification data from the Mexican gasoline market, this paper examines whether gas stations react to peers’ performance to adjust their own compliance decisions. The information disclosure policy assigned each inspected gas station with green, yellow, or red colors to indicate the status of compliance, minor violation, and severe violation, respectively. We find strong evidence of peer influence triggered by information spillover. The probability of being in compliance increases as the number of “green” peers increases. We use both municipalities and postal codes as geographic boundaries to define potential peers, and find similar results. Our findings also suggest that the magnitude of peer effects varies across municipalities: the effects appear to be greater in wealthier, more educated communities.

Keywords: Peer effects; Regulation; Mexico; Asymmetric information; Gasoline markets (search for similar items in EconPapers)
JEL-codes: D18 D22 D80 L10 L14 L51 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11149-018-9362-1

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