The Harrington Paradox Squared

38 Pages Posted: 8 Mar 2015

See all articles by Jessica Coria

Jessica Coria

Department of Economics, University of Gothenburg

Xiao Bing Zhang

University of Gothenburg

Date Written: January 3, 2015


Harrington (1988) shows that state-dependent enforcement based on past compliance records provides an explanation to the seemingly contradictory observation that firms' compliance with environmental regulations is high despite the fact that inspections occur infrequently and fines are rare and small. This result has been labeled in the literature as the "Harrington paradox." In this paper we propose an improved transition structure for the audit framework where targeting is based not only on firms' past compliance record but also on adoption of environmentally superior technologies. We show that this transition structure would not only foster the adoption of new technology but also increase deterrence by changing the composition of firms in the industry toward an increased fraction of cleaner firms that pollute and violate less.

Keywords: imperfect compliance, state-dependent targeted enforcement, technology adoption, emission standards.

JEL Classification: L51, Q55, K31, K42

Suggested Citation

Coria, Jessica and Zhang, Xiao Bing, The Harrington Paradox Squared (January 3, 2015). Available at SSRN: or

Jessica Coria (Contact Author)

Department of Economics, University of Gothenburg ( email )

Vasagatan 1
Goteborg, 40530

Xiao Bing Zhang

University of Gothenburg ( email )

Viktoriagatan 30
Göteborg, 405 30

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