NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Roy Shapira

IDC
Kanfei Nesharim
Herzliya, 4610101
Israel

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NBER Working Papers and Publications

September 2017Is Pollution Value-Maximizing? The DuPont Case
with Luigi Zingales: w23866
DuPont, one of the most respectable U.S. companies, caused environmental damage that ended up costing the company around a billion dollars. By using internal company documents disclosed in trials we rule out the possibilities that this bad outcome was due to ignorance, an unexpected realization, or a problem of bad governance. The documents rather suggest that the polluting was a rational decision: under reasonable probabilities of detection, polluting was ex-ante optimal from the company’s perspective, even if the cost of preventing pollution was lower than the cost of the health damages produced. We then examine why different mechanisms of control – legal liability, regulation, and reputation – all failed to deter a behavior that was inefficient from a social point of view. One common re...
 
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