Strategic Behavior and the Environment > Vol 5 > Issue 2

Extent of Cooperative Enforcement: Effect of the Regulator-Regulated Facility Relationship on Audit Frequency

Dietrich Earnhart, Department of Economics, University of Kansas, USA, , Robert L. Glicksman, The George Washington University Law School, USA,
Suggested Citation
Dietrich Earnhart and Robert L. Glicksman (2015), "Extent of Cooperative Enforcement: Effect of the Regulator-Regulated Facility Relationship on Audit Frequency", Strategic Behavior and the Environment: Vol. 5: No. 2, pp 111-156.

Publication Date: 08 Oct 2015
© 2015 D. Earnhart and R. L. Glicksman
Public policy,  Regulation
Environmental managementComplianceEnforcement approachSelf-audits


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In this article:
1. Introduction 
2. Literature Review 
3. Empirical Application 
4. Econometric Approach 
5. Data Collection 
6. Estimation Methods and Results 
7. Policy and Research Implications 
Appendix: Incomplete Response to Survey of Chemical Manufacturing Facilities 


A spirited debate explores the comparative merits of two different approaches to the enforcement of environmental law: the noncooperative approach, which emphasizes the deterrence of noncompliance through inflexibly imposed sanctions, and the cooperative approach, which emphasizes the inducement of compliance through flexibility and assistance. Both scholarly and policymaking communities are interested in this topic of enforcement approach within the realms of finance, tax compliance, occupational safety, food and drug safety, consumer product safety, and environmental protection, among others. To inform this debate, our study explores enforcement of environmental protection laws where the debate has been especially spirited yet lacking in much empirical evidence. Specifically, our study empirically analyzes the effect of enforcement approach on the frequency of self-audits linked to compliance with wastewater discharge limits imposed on chemical manufacturing facilities. For this analysis, we view the enforcement approach as representing a relationship between a regulator and a regulated facility that is measured in multiple dimensions. The empirical results reveal that, in general, a cooperative relationship induces more frequent auditing and, in particular, a more stable and higher quality relationship increases audit frequency, while a completely fair relationship yields less frequent auditing. However, these conclusions may depend on the extent of regulatory monitoring and enforcement. Specifically, they rely on sufficiently lower monitoring and enforcement. Once the extent of monitoring and enforcement becomes sufficiently strong, the empirical results appear to support the opposite conclusions.