PEW: Karam Kang

Oct 14, 2019, 4:15 pm5:30 pm
127 Corwin Hall


Event Description

We exploit institutional changes in the enforcement of water quality regulations in California, and study regulatory discretion by identifying and estimating a structural model of strategic interactions between a regulator and a privately-informed discharger. We find that even if the regulator’s objective function were the same across dischargers, differences in the punishment of violations would mostly persist. Moreover, we quantify the extent to which employing regulators’ knowledge about dischargers can be beneficial. Specifically, we find that limiting regulatory discretion would, on average, raise enforcement costs and in- crease violations by dischargers with relatively high benefits of compliance.