TY - JOUR
T1 - Escalation of scrutiny
T2 - The gains from dynamic enforcement of environmental regulations
AU - Blundell, Wesley
AU - Gowrisankaran, Gautam
AU - Langer, Ashley
N1 - Funding Information:
* Blundell: School of Economic Sciences, Washington State University (email: [email protected]); Gowrisankaran: University of Arizona (email: [email protected]); Langer: University of Arizona (email: [email protected]). Liran Einav was the coeditor for this article. We thank Dan Ackerberg, Christian Belzil, Chase Eck, Paul Ellickson, Meredith Fowlie, Wayne Gray, Tobias Häggmark, Charles Hodgson, Alex Hollingsworth, Karam Kang, Anatolii Kokoza, Derek Lemoine, Bentley MacLeod, Kelli Marquardt, Andy McLennan, Shaun McRae, Ivan Rudik, Nick Ryan, Paul Scott, Jay Shimshack, Kenneth Train, Kyle Wilson, Jonathan Williams, Tiemen Woutersen, Chenyu Yang, anonymous referees, and seminar participants at numerous institutions for helpful comments. We are grateful to Yujia Peng for excellent research assistance. Our computations used the University of Arizona High Performance Computing (HPC) resources supported by the UA TRIF, UITS, and RDI and maintained by the UA Research Technologies Department. Terri Dykes and Jason Swift at EPA were generous in helping us to understand the details of the data and Clean Air Act enforcement generally. Gowrisankaran acknowledges funding from the National Science Foundation (grant SES-1824348).
Publisher Copyright:
© 2020 American Economic Association. All rights reserved.
PY - 2020/8
Y1 - 2020/8
N2 - The US Environmental Protection Agency (EPA) uses a dynamic approach to enforcing air pollution regulations, with repeat offenders subject to high fines and designation as high priority violators (HPV). We estimate the value of dynamic enforcement by developing and estimating a dynamic model of a plant and regulator, where plants decide when to invest in pollution abatement technologies. We use a fixed grid approach to estimate random coefficient specifications. Investment, fines, and HPV designation are costly to most plants. Eliminating dynamic enforcement would raise pollution damages by 164 percent with constant fines or raise fines by 519 percent with constant pollution damages.
AB - The US Environmental Protection Agency (EPA) uses a dynamic approach to enforcing air pollution regulations, with repeat offenders subject to high fines and designation as high priority violators (HPV). We estimate the value of dynamic enforcement by developing and estimating a dynamic model of a plant and regulator, where plants decide when to invest in pollution abatement technologies. We use a fixed grid approach to estimate random coefficient specifications. Investment, fines, and HPV designation are costly to most plants. Eliminating dynamic enforcement would raise pollution damages by 164 percent with constant fines or raise fines by 519 percent with constant pollution damages.
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U2 - 10.1257/AER.20181012
DO - 10.1257/AER.20181012
M3 - Article
AN - SCOPUS:85091933455
SN - 0002-8282
VL - 110
SP - 2558
EP - 2585
JO - American Economic Review
JF - American Economic Review
IS - 8
ER -