Enforcing Regulation Under Illicit Adaptation

64 Pages Posted: 12 Sep 2018

See all articles by Andres Gonzalez Lira

Andres Gonzalez Lira

University of California, Berkeley

Ahmed Mushfiq Mobarak

Yale School of Management; Yale University - Cowles Foundation

Multiple version iconThere are 3 versions of this paper

Date Written: August 11, 2018

Abstract

Attempts to curb illegal activity by enforcing regulations gets complicated when agents re-act to the new regulatory regime in unanticipated ways to circumvent enforcement. We present a research strategy that uncovers such reactions, and permits program evaluation net of such adaptive behaviors. Our interventions were designed to reduce over-fishing of the critically endangered Pacific hake by either (a) monitoring and penalizing vendors that sell illegal fish or (b) discouraging consumers from purchasing using an information campaign. Vendors attempt to circumvent the ban through hidden sales and other means, which we track using mystery shoppers. Instituting random monitoring visits are much more effective in reducing true hake availability by limiting such cheating, compared to visits that occur on a predictable schedule. Monitoring at higher frequency (designed to limit temporal displacement of illegal sales) backfires, because targeted agents learn faster, and cheat more effectively. Sophisticated policy design is therefore crucial for determining the sustained, longer-term effects of enforcement. Data collected from fishermen, vendors, and consumers allow us to document the upstream, downstream, spillover, and equilibrium effects of enforcement on the entire supply chain. The consumer information campaign generates two-thirds of the gains compared to random monitoring, but is simpler for the government to implement and almost as cost-effective.

Suggested Citation

Gonzalez Lira, Andres and Mobarak, Ahmed Mushfiq, Enforcing Regulation Under Illicit Adaptation (August 11, 2018). Yale University Economic Growth Center Discussion Paper No. 1063. Available at SSRN: https://ssrn.com/abstract=3241773 or http://dx.doi.org/10.2139/ssrn.3241773

Andres Gonzalez Lira (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Ahmed Mushfiq Mobarak

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5787 (Phone)

HOME PAGE: http://mba.yale.edu/faculty/profiles/mobarak.shtml

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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