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Competition Makes Inspectors More Lenient : Evidence from the Motor Vehicle Inspection Market

Habte, Osmis Areda LU and Holm, Håkan J. LU (2022) In Review of Industrial Organization 61(1). p.45-72
Abstract

We investigate whether increased competition among inspection firms leads to an increase in the inspection pass rate in the Swedish car inspection market, which is heavily regulated and consciously designed to mitigate incentives to violate government regulations. We use a panel dataset that represent 22.5 million car roadworthiness tests that were conducted during the period 2010–2015. Fixed effects and instrumental variable estimations, which are used to account for the endogeneity of competition, show that inspection stations that operate in highly competitive markets are more lenient toward their customers than are stations that operate in less competitive markets.

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author
and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Competition, Deregulation, Illegal leniency, Motor vehicle inspection market, Pass rate
in
Review of Industrial Organization
volume
61
issue
1
pages
45 - 72
publisher
Springer
external identifiers
  • scopus:85127816352
ISSN
0889-938X
DOI
10.1007/s11151-022-09864-z
language
English
LU publication?
yes
id
1f213152-76e9-4381-bd83-34e934583575
date added to LUP
2022-06-28 11:37:37
date last changed
2022-10-31 14:57:55
@article{1f213152-76e9-4381-bd83-34e934583575,
  abstract     = {{<p>We investigate whether increased competition among inspection firms leads to an increase in the inspection pass rate in the Swedish car inspection market, which is heavily regulated and consciously designed to mitigate incentives to violate government regulations. We use a panel dataset that represent 22.5 million car roadworthiness tests that were conducted during the period 2010–2015. Fixed effects and instrumental variable estimations, which are used to account for the endogeneity of competition, show that inspection stations that operate in highly competitive markets are more lenient toward their customers than are stations that operate in less competitive markets.</p>}},
  author       = {{Habte, Osmis Areda and Holm, Håkan J.}},
  issn         = {{0889-938X}},
  keywords     = {{Competition; Deregulation; Illegal leniency; Motor vehicle inspection market; Pass rate}},
  language     = {{eng}},
  number       = {{1}},
  pages        = {{45--72}},
  publisher    = {{Springer}},
  series       = {{Review of Industrial Organization}},
  title        = {{Competition Makes Inspectors More Lenient : Evidence from the Motor Vehicle Inspection Market}},
  url          = {{http://dx.doi.org/10.1007/s11151-022-09864-z}},
  doi          = {{10.1007/s11151-022-09864-z}},
  volume       = {{61}},
  year         = {{2022}},
}