Costly sanctions and the treatment of frequent violators in regulatory settings

Jay Shimshack and Michael Ward

No 2022-20, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: Regulators typically treat frequent violators more harshly. When does such harsh treatment maximize overall compliance? We consider the role of two factors: responsiveness to penalties and costs of sanctions. A novel insight is that maintaining a credible threat of sanction against infrequent violators is relatively cheap because that threat seldom needs to be backed up. In a Clean Water Act application, the marginal sanction deters ten times as many violations when directed at infrequent violators. On net, this difference is due to a sanction cost effect, not because infrequent violators are marginally more responsive to the threat of punishment.

Keywords: Enforcement; Repeat Offender; Compliance; Government Expenditures (search for similar items in EconPapers)
JEL-codes: H50 K32 K42 Q58 (search for similar items in EconPapers)
Date: 2022-10
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Citations: View citations in EconPapers (1)

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Journal Article: Costly sanctions and the treatment of frequent violators in regulatory settings (2022)
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