The Desirability of Forgiveness in Regulatory Enforcement

35 Pages Posted: 27 May 2013

See all articles by Arun S. Malik

Arun S. Malik

George Washington University - Department of Economics

Date Written: May 24, 2013

Abstract

I present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a fi…rm'’s compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a …firm'’s compliance activities constitutes sufficiently strong evidence of the fi…rm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the …firm needs to be monitored. If fines are costly, a further benefit is a reduction in fine costs.

Keywords: enforcement of regulation, selective enforcement, Harrington paradox

JEL Classification: L51, K42, K32, D86

Suggested Citation

Malik, Arun S., The Desirability of Forgiveness in Regulatory Enforcement (May 24, 2013). Available at SSRN: https://ssrn.com/abstract=2269985 or http://dx.doi.org/10.2139/ssrn.2269985

Arun S. Malik (Contact Author)

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052
United States

HOME PAGE: http://home.gwu.edu/~amalik/

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