Are Newspaper Deserts an Oasis for Leniency? The Effect of Information Dissemination on Regulator Activity

Abstract

In this paper, I show that regulators react to a decrease in local information dissemination by decreasing their activity. Specifically, I find that a local newspaper closure decreases the inspection rate in a given county-industry by 8%, compared to the same industry in a neighboring county. I also find that regulators react on the intensive margin by decreasing the extent of inspections and that the effect is stronger when regulators have more discretion over the enforcement activity. A decrease in information dissemination decreases the deterrence effects of inspections, and thus the effectiveness of the regulator's activity. I show that regulators take the effectiveness of their activity into account and react more strongly when newspaper closures have a larger effect on deterrence and are more salient. In addition, I do not find strong evidence for the regulator's response being driven by a change in reputational concerns. Overall, I find robust evidence that regulators decrease their activity after a decrease in information dissemination. My results show that information dissemination can be an integral part of regulators' enforcement choices due to the inherent deterrence effects.

Keywords: Misconduct, enforcement, regulator effectiveness, deterrence, compliance, information dissemination, media, OSHA, regulation

JEL Classification: G18, J28, J81, K32, L51, M48