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Do Citizen Lawsuits Affect Plants' Decision to Comply with Environmental Regulation?

Svensson, Elina LU (2015) NEKP01 20142
Department of Economics
Abstract (Swedish)
This study aims to contribute one piece to the puzzle on why industry plants in the U.S. choose to comply with environmental laws under seemingly low incentives i.e., few inspections and low fines. This study investigates private enforcement, specifically citizen suits, as a possible determinant of plants' compliance behavior.

Empirically, the study focuses on compliance with the Clean Water Act (CWA) among 1494 wastewater treatment facilities in the U.S. In a fixed effects 2SLS IV model, using a ten year panel with monthly data, this study finds that a plant that has been subject to private enforcement through a citizen lawsuit during the past 12 months, is up to 485% less likely to be in violation of the CWA, compared to plants that... (More)
This study aims to contribute one piece to the puzzle on why industry plants in the U.S. choose to comply with environmental laws under seemingly low incentives i.e., few inspections and low fines. This study investigates private enforcement, specifically citizen suits, as a possible determinant of plants' compliance behavior.

Empirically, the study focuses on compliance with the Clean Water Act (CWA) among 1494 wastewater treatment facilities in the U.S. In a fixed effects 2SLS IV model, using a ten year panel with monthly data, this study finds that a plant that has been subject to private enforcement through a citizen lawsuit during the past 12 months, is up to 485% less likely to be in violation of the CWA, compared to plants that have not been sued, holding all other variables. The marginal direct deterrence effect of a citizen suit is expected to yield a reduction of 6.24 to 14.31 violations.

The result is robust to three different IV estimation methods (OLS, LPM and Probit) and three different sets of instruments. Citizen suits are instrumented with judicial instruments, exploiting that all citizen suits have to go through a federal district court. Public enforcement are instrumented with three new found instruments: EPA's enforcement budget and two instruments capturing the public demand for enforcement of environmental regulation. This study’s key contribution is systematic micro-level empirical evidence on citizen suits significant causal effect in plants' compliance behavior. (Less)
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author
Svensson, Elina LU
supervisor
organization
course
NEKP01 20142
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Citizen lawsuits, Enforcement, Clean Water Act, Compliance, Violation, deterrence effect, EPA, environmental regulation.
language
English
id
4986316
date added to LUP
2015-02-06 10:17:12
date last changed
2015-02-06 10:17:12
@misc{4986316,
  abstract     = {This study aims to contribute one piece to the puzzle on why industry plants in the U.S. choose to comply with environmental laws under seemingly low incentives i.e., few inspections and low fines. This study investigates private enforcement, specifically citizen suits, as a possible determinant of plants' compliance behavior.

Empirically, the study focuses on compliance with the Clean Water Act (CWA) among 1494 wastewater treatment facilities in the U.S. In a fixed effects 2SLS IV model, using a ten year panel with monthly data, this study finds that a plant that has been subject to private enforcement through a citizen lawsuit during the past 12 months, is up to 485% less likely to be in violation of the CWA, compared to plants that have not been sued, holding all other variables. The marginal direct deterrence effect of a citizen suit is expected to yield a reduction of 6.24 to 14.31 violations.

The result is robust to three different IV estimation methods (OLS, LPM and Probit) and three different sets of instruments. Citizen suits are instrumented with judicial instruments, exploiting that all citizen suits have to go through a federal district court. Public enforcement are instrumented with three new found instruments: EPA's enforcement budget and two instruments capturing the public demand for enforcement of environmental regulation. This study’s key contribution is systematic micro-level empirical evidence on citizen suits significant causal effect in plants' compliance behavior.},
  author       = {Svensson, Elina},
  keyword      = {Citizen lawsuits,Enforcement,Clean Water Act,Compliance,Violation,deterrence effect,EPA,environmental regulation.},
  language     = {eng},
  note         = {Student Paper},
  title        = {Do Citizen Lawsuits Affect Plants' Decision to Comply with Environmental Regulation?},
  year         = {2015},
}