The Effect of Enforcement Fairness on Environmental Performance

Abstract

Many empirical studies explore the effects of regulatory enforcement on environmental behavior and performance. Within this literature, a few empirical studies explore environmental regulators’ approach to enforcement, such as the contrast between a coercive strategy and a cooperative strategy. However, very little empirical research explores the role of fairness, which we interpret broadly to include multiple dimensions, e.g., similar treatment of similarly situated regulated entities. This study empirically analyzes the effect of enforcement fairness on the extent of compliance with wastewater discharge limits imposed on U.S. chemical manufacturing facilities. For this analysis, we use a subjective measure of the degree of “fair treatment” of the regulated facilities by the environmental regulator, as perceived by facilities and reported in response to an original survey. The empirical results robustly reveal that a less fair enforcement approach leads to better environmental performance, i.e., greater compliance.