From Enforcement to Compliance–Enforcement Governance: The Role of Institutional Credibility

Gleymang Jaramillo Abad and Uwasu Michinori
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Gleymang Jaramillo Abad: Osaka School of International Public Policy, the University of Osaka
Uwasu Michinori: Graduate School of Economics, The University of Osaka

No 26E010, OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University

Abstract: Socio-environmental issues are often studied by focusing on enforcement or compliance in isolation, with emphasis on sanction design. This study proposes a joint compliance–enforcement framework, in which sustainable governance emerges from the balanced, cyclical interaction between firms’ compliance decisions and authorities’ institutional capacities. The holder’s compliance decision is modeled as an expected-utility maximization problem. We formally derive that the post-detection probability—as a measure of institutional credibility—exerts a stronger marginal influence on holders’ compliance than the raw detection probability. This result holds through two independent channels: Arrow–Pratt global risk-aversion and information-theoretic foundations. Sustainable incentives are modeled as a positive integral payoff, distinct from the illicit-benefit deterrence. The governance multiplier result shows that improving post-detection probability simultaneously amplifies both deterrence and incentive channels. The framework is illustrated using stylized facts from large-scale fisheries in Peru and yields three testable implications with falsification conditions on compliance effort and repercussions.

Keywords: Compliance; Environmental governance; Institutional credibility; Regulatory enforcement; Sustainability (search for similar items in EconPapers)
JEL-codes: D81 D82 K42 L51 Q58 (search for similar items in EconPapers)
Pages: 41pages
Date: 2026-09
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