Analysis of Firm Compliance with Multiple Environmental regulations

When a firm is regulated by multiple environmental programs, the firm may manage its compliance with these programs systematically so that the regulation of one program can affect firm decisions regarding compliance with other programs, Faced with budget constraints on compliance expenditure. a firm is likely to reduce its compliance with one program when certain incentives to comply better with another program arises. Such incentives can include more frequent inspection or higher penalties under another program. This paper examines the existence of such negative spillover effects across programs. A fixed effects model is estimated using data on facilities regulated under CAA (Clean Air Act) and RCRA (Reservation and Conservation Recovery Act). Results confirm negative spillover effects. Increases in RCRA penalties as well increases in RCRA inspections on other facilities result in facilities complying less with CAA regulations.