School of Economic Sciences
Washington State University
Pullman, WA 99164
Institutional Affiliation: Washington State University
NBER Working Papers and Publications
|July 2018||Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations|
with , : w24810
The U.S. Environmental Protection Agency 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% with constant fines or raise fines by 519% with constant pollution damages.