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

Habte, Osmis LU and Holm, Hj LU (2017) In Working Papers
Abstract
We examine the impact of competition on a firm's incentive to relax the standards of its inspection to its customers in the Swedish motor vehicle inspection market, which is heavily regulated and consciously designed to mitigate incentives to deviate from the regulation. We use a panel dataset representing 22.5 million car roadworthiness tests 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 to their customers than stations that operate in less competitive markets.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
leniency, pass rate, inspection behavior, competition, deregulation, inspection market, D22, L11, L84
in
Working Papers
issue
2017:19
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
6d72887c-137e-42b1-b618-418f026c793d
alternative location
https://swopec.hhs.se/lunewp/abs/lunewp2017_019.htm
date added to LUP
2018-02-16 11:07:53
date last changed
2018-11-21 21:38:04
@misc{6d72887c-137e-42b1-b618-418f026c793d,
  abstract     = {We examine the impact of competition on a firm's incentive to relax the standards of its inspection to its customers in the Swedish motor vehicle inspection market, which is heavily regulated and consciously designed to mitigate incentives to deviate from the regulation. We use a panel dataset representing 22.5 million car roadworthiness tests 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 to their customers than stations that operate in less competitive markets.},
  author       = {Habte, Osmis and Holm, Hj},
  keyword      = {leniency,pass rate,inspection behavior,competition,deregulation,inspection market,D22,L11,L84 },
  language     = {eng},
  note         = {Working Paper},
  number       = {2017:19},
  publisher    = {Department of Economics, Lund Universtiy},
  series       = {Working Papers},
  title        = {Competition Makes Inspectors More Lenient: Evidence from the Motor Vehicle Inspection Market},
  year         = {2017},
}