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Firms’ Compliance to Environmental Regulation: Is There Really a Paradox?

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Listed:
  • Karine Nyborg
  • Kjetil Telle
Abstract
It has often been claimed that firms’ compliance to environmental regulations is higher than predicted by standard theory, a result labeled the “Harrington paradox” in the literature. Enforcement data from Norway presented here appears, at first glance, to confirm this “stylized fact”: firms are inspected less than once a year, detected violators are seldom fined, but still, serious violations seem relatively rare. However, at a closer look, the pattern seems less paradoxical: enforcement of minor violations is lax, but such violations do flourish; serious violations, on the other hand, are subject to credible threats of harsh punishment, and such violations are more uncommon. This seems quite consistent with predictions from standard theory. We argue that the empirical existence of the Harrington paradox is not well documented in the international literature. The claim that firms’ compliance with environmental regulations is generally higher than predicted by standard theory should thus be regarded as a hypothesis rather than an established fact. Copyright Springer Science+Business Media, Inc. 2006

Suggested Citation

  • Karine Nyborg & Kjetil Telle, 2006. "Firms’ Compliance to Environmental Regulation: Is There Really a Paradox?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(1), pages 1-18, September.
    • Handle: RePEc:kap:enreec:v:35:y:2006:i:1:p:1-18
    DOI: 10.1007/s10640-006-9001-7
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    Citations

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    Cited by:

    1. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Documents de travail du Centre d'Economie de la Sorbonne 22013, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Kjetil Telle, 2012. "Monitoring and enforcement of environmental regulations. Lessons from a natural field experiment in Norway," Discussion Papers 680, Statistics Norway, Research Department.
    3. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03704334, HAL.
    4. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Post-Print halshs-03704334, HAL.
    5. Rousseau, Sandra & Telle, Kjetil, 2010. "On the existence of the optimal fine for environmental crime," International Review of Law and Economics, Elsevier, vol. 30(4), pages 329-337, December.
    6. Suurmond, Guido, 2007. "The effects of the enforcement strategy," MPRA Paper 21142, University Library of Munich, Germany.
    7. Zhengjie Gao & Dayi He & Shuaifang Niu, 2021. "On What Could Chinese Mining Enterprises Achieve High-Level Environmental Performance?—Based on the fsQCA Method," IJERPH, MDPI, vol. 18(14), pages 1-16, July.
    8. Coria, Jessica & Zhang, Xiao-Bing, 2015. "The Harrington Paradox Squared," Working Papers in Economics 608, University of Gothenburg, Department of Economics.
    9. Rousseau, Sandra, 2009. "The use of warnings in the presence of errors," International Review of Law and Economics, Elsevier, vol. 29(3), pages 191-201, September.
    10. Brita Bye & Marit E. Klemetsen, 2018. "The Impacts of Alternative Policy Instruments on Environmental Performance: A Firm Level Study of Temporary and Persistent Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 317-341, February.
    11. Timo Goeschl & Johannes Jarke, 2013. "The warnings puzzle: an upstream explanation," Journal of Regulatory Economics, Springer, vol. 44(3), pages 339-360, December.
    12. Brita Bye & Marit E. Klemetsen, 2014. "The impacts of alternative policy instruments on environmental performance. A firm level study of temporary and persistent effects," Discussion Papers 788, Statistics Norway, Research Department.
    13. Sarah Stafford, 2013. "How predictable are environmental compliance inspections?," Journal of Regulatory Economics, Springer, vol. 44(3), pages 361-388, December.
    14. Kjetil Telle, 2009. "The threat of regulatory environmental inspection: impact on plant performance," Journal of Regulatory Economics, Springer, vol. 35(2), pages 154-178, April.
    15. Jessica Coria & Xiao-Bing Zhang, 2015. "State-Dependent Enforcement to Foster the Adoption of New Technologies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 359-381, October.
    16. Peiyao Shen & Regina Betz & Andreas Ortmann & Rukai Gong, 2020. "Improving Truthful Reporting of Polluting Firms by Rotating Inspectors: Experimental Evidence from a Bribery Game," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 201-233, July.
    17. Telle, Kjetil, 2013. "Monitoring and enforcement of environmental regulations," Journal of Public Economics, Elsevier, vol. 99(C), pages 24-34.
    18. Lirong Liu & Zhou Yang, 2020. "Leveraged enforcement under the EPA’s High Priority Violation Policy," Empirical Economics, Springer, vol. 58(3), pages 1279-1304, March.
    19. Holstein, Fredrik & Gren, Ing-Marie, 2013. "Violation of environmental regulations in Sweden: Economic motives, environmental attitudes, and social capital," Working Paper Series 2013:3, Swedish University of Agricultural Sciences, Department Economics.
    20. Rousseau, Sandra, 2009. "Empirical Analysis of Sanctions for Environmental Offenses," International Review of Environmental and Resource Economics, now publishers, vol. 3(3), pages 161-194, December.
    21. Linghu, Jingying & Guo, Chengcheng, 2024. "Digital government: The new player in improving mining companies’ environmental performance?," Resources Policy, Elsevier, vol. 93(C).
    22. Rafael Robina Ramírez & Pedro R. Palos-Sánchez, 2018. "Environmental Firms’ Better Attitude towards Nature in the Context of Corporate Compliance," Sustainability, MDPI, vol. 10(9), pages 1-21, September.
    23. D'Amato, Alessio & Mazzanti, Massimiliano & Nicolli, Francesco & Zoli, Mariangela, 2018. "Illegal waste disposal: Enforcement actions and decentralized environmental policy," Socio-Economic Planning Sciences, Elsevier, vol. 64(C), pages 56-65.

    More about this item

    Keywords

    compliance; enforcement; environmental performance; Harrington paradox; K32; K42; Q28; L51;
    All these keywords.

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Harrinqton paradoksu in Wikipedia Azerbaijani
    2. Harrington paradox in Wikipedia English

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