Enforcement missions: Targets vs budgets |
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Authors: | Anthony Heyes Sandeep Kapur |
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Institution: | aDepartment of Economics, Royal Holloway College, University of London, Surrey, TW20 0EX England, UK;bBirkbeck College, University of London, UK |
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Abstract: | Enforcement of policy is typically delegated. What sort of mission should the head of an enforcement program be given? When there is more than one firm being regulated the firms’ decision problems—otherwise completely separate—become linked in a way that depends on that mission. Under some sorts of missions firms compete to avoid the attention of the enforcer by competitive reductions in the extent of their non-compliance, in others the interaction encourages competitive expansions. We develop a general model that allows for the ordering of some typical classes of missions. We find that in plausible settings ‘target-driven’ missions (that set a hard target in terms of environmental outcome but flexible budget) achieve the same outcome at lower cost than ‘budget-driven’ ones (that fix the enforcement budget). Inspection of some fixed fraction of firms is never optimal. |
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Keywords: | Enforcement Regulatory missions Policy delegation |
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