Self-Policing in Environmental Regulation: An Empirical Approach

Abstract

We study the effects of self-policing environmental regulations on the quantity of air pollutants released to the environment, as well as on the number of inspections that the regulatory agencies conduct. We find that audit privilege and self-policing policies have a negative and significant impact on the number of inspections, while immunity increases inspections in a significant way. Emissions are increased by immunity laws and decreased by audit privilege regulations. We find evidence that self-policing policies support what the theory predicts: self-policing regulations reduce inspections and, therefore, decrease enforcement costs (Kaplow and Shavell, 1994; Malik, 1993; Innes, 1999a: Innes, 1999b; Innes, 2000; Innes, 2001). We also find that audit privilege and immunity laws that apply to administrative and civil penalties have a more significant effect on inspections, compared to audit privilege and immunity laws that apply to administrative, civil and criminal penalties.