Monitoring and enforcement of environmental regulations: Lessons from a natural field experiment in Norway

Relying on a small natural field experiment conducted by the Norwegian Environmental Protection Agency, I estimate effects of three fundamental elements of most monitoring and enforcement practices: self-reporting, audit frequency and specific deterrence. I find evidence of under-reporting of violations in firms' self-audits, as more violations are detected in on-site audits than in self-audits. Announcing the increased audit frequency has no effect on firms' compliance, but an audit raises subsequent compliance substantially.

► Effects of monitoring and enforcement activities of Environmental Protection Agencies are studied.
► Effect estimates rely on exogenous variation from random assignment of treatments.
► Announcing an increased audit frequency has no effect on firms' compliance.
► Audits raise firms' subsequent compliance substantially.
► Evidence of under-reporting of violations in firms' self-reports.