Analysis of Firm Compliance with Multiple Environmental Regulations

Abstract

When a firm is regulated by multiple environmental programs, the firm may manage its compliance with these programs systematically so that the regulation of one program can affect firm decisions regarding compliance with other programs. This paper examines the existence and the nature of such spillover effects across programs. A panel data model is estimated using data on facilities regulated under CAA (Clean Air Act) and RCRA (Reservation and Conservation Recovery Act). Results show evidence of negative spillover effects. Increases in RCRA inspections and penalties as well as the threat of an RCRA inspection result in facilities complying less with CAA regulations. Furthermore, facilities that are regulated under other programs such as Toxic Release Inventory (TRI) and Clean Water Act (CWA) show less compliance than other facilities.

Keywords: air pollution, hazardous waste pollution, compliance, complementary, substitution

JEL Classification: Q53, Q58, L51