What improves environmental compliance? Evidence from Mexican industry
This paper uses new survey evidence to analyze the effects of regulation, plant-level management policies, and other factors on the environmental compliance of Mexican manufacturers. In Mexico and other developing countries, many plants avoid complying with regulations because monitoring and enforcement are sporadic. On the other hand, some plants overcomply because their abatement decisions are strongly affected by extra legal factors. The authors attempt to capture both possibilities in a model of decision making under uncertainty: A plant minimizes expected pollution-related costs by setting emissions intensity (emissions/output) at the point where marginal abatement cost is equal to the expected marginal penalty for polluting. Compliance status is determined by the positive or negative gap between the regulatory standard and the plant's cost-minimizing emissions intensity. Among determinants of the latter, the authors focus particularly on environmental management policies: the degree of effort to reduce emissions, and the type of management strategy which is adopted. Recognizing that these policies and emissions are simultaneously determined, they use two-stage least squares for econometric estimation. Their results suggest that environmental management has a strong, independent effect on compliance, even after their control for simultaneity and take many other determinants of emissions intensity into account. The authors conclude that in developing countries with weak regulations, the carrot of subsidized environmental management training may provide a useful complement to the uncertain stick of conventional enforcement.
- Research Organization:
- World Bank, Washington, DC (US)
- OSTI ID:
- 20015104
- Journal Information:
- Journal of Environmental Economics and Management, Vol. 39, Issue 1; Other Information: PBD: Jan 2000; ISSN 0095-0696
- Country of Publication:
- United States
- Language:
- English
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