Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9731463 | The Quarterly Review of Economics and Finance | 2005 | 21 Pages |
Abstract
In this paper we address why firms comply with environmental regulations when enforcement is weak by suggesting that firms choose their level of environmental compliance strategically. Our theoretical model shows that compliance decisions among firms are strategic complements-increased compliance by one firm will positively influence the compliance rate of its rival. In our empirical analysis we find that the compliance rates of other regulated entities have a positive and significant effect on a regulated source's compliance behavior in three of our four heavily regulated industries. If compliance decisions are strategic complements, this may partially explain high compliance rates in the presence of limited regulatory pressure.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Christopher S. Decker, Christopher R. Pope,