NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations

Wesley Blundell, Gautam Gowrisankaran, Ashley Langer

NBER Working Paper No. 24810
Issued in July 2018, Revised in August 2019
NBER Program(s):The Environment and Energy Program, The Industrial Organization Program, The Public Economics Program

The U.S. Environmental Protection Agency uses a dynamic approach to environmental enforcement for air pollution, 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 emissions damages by 167% with constant fines or raise fines by 533% with constant pollution.

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Document Object Identifier (DOI): 10.3386/w24810

 
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