A Dissolving Paradox: Firms' Compliance to Environmental Regulation

University of Oslo Economics Working Paper No. 02-2004

30 Pages Posted: 12 Aug 2004

See all articles by Karine Nyborg

Karine Nyborg

University of Oslo - Department of Economics; IZA Institute of Labor Economics

Kjetil Telle

Statistics Norway - Research Department

Date Written: January 2004

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 paradox dissolves: Enforcement of minor violations is lax, but such violations do flourish; serious violations are more uncommon, but such violations are subject to credible threats of harsh punishment. This seems quite consistent with predictions from standard theory. Although our finding may of course apply to Norway only, we argue that the empirical existence of the Harrington paradox is not well documented in the literature. Hence, the claim that firms' compliance with environmental regulations is higher than predicted by standard theory should be viewed with skepticism.

Keywords: Environmental performance, compliance, enforcement, Harrington paradox

JEL Classification: K32, K42, Q28, L51

Suggested Citation

Nyborg, Karine and Telle, Kjetil, A Dissolving Paradox: Firms' Compliance to Environmental Regulation (January 2004). University of Oslo Economics Working Paper No. 02-2004. Available at SSRN: https://ssrn.com/abstract=575401 or http://dx.doi.org/10.2139/ssrn.575401

Karine Nyborg (Contact Author)

University of Oslo - Department of Economics ( email )

P.O.Box 1095 Blindern
Oslo, N-0317
Norway

HOME PAGE: http://folk.uio.no/karineny/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Kjetil Telle

Statistics Norway - Research Department ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway

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