Robert Innes

Voluntary Pollution Reductions and the Enforcement of Environmental Law: An Empirical Study of the 33/50 Program

This paper studies determinants and effects of firms’ participation in the 33/50 program, which is a voluntary pollution reduction (VPR) program initiated by government regulators. We examine a wide range of explanations for voluntary corporate environmentalism and find evidence in support of an enforcement theory that predicts that (1) VPR participation is rewarded by relaxed regulatory scrutiny, (2) the anticipation of this reward spurs firms to participate in the program, and (3) the program rewards regulators with reduced pollution. We also find that 33/50 participation was more likely for firms operating in states with larger environmentalist constituencies.

Remediation and self-reporting in optimal law enforcement

Abstract Many environmental laws encourage firms to self-report their violations to government regulators, rather than subject themselves to probabilistic enforcement. This paper studies self-reporting enforcement regimes when there are ex-post benefits of remediation or clean-up. Remediation benefits are shown to impart two advantages to the use of self-reporting beyond those identified elsewhere. Firstly, whereas non-reporting firms only engage in costly clean-up when they are caught by an enforcement authority, self-reporting firms always engage in efficient remediation. Secondly, with self-reporting, the government can costlessly impose stiffer non-reporter penalties that reduce the government enforcement effort required to achieve a given level of violation deterrence.

Investment and government intervention in credit markets when there is asymmetric information

Abstract This paper models private firm investment choices and government credit policy in an entrepreneurial firm financial market wherein firm owners have better information about the quality of their return distributions than do external financiers. The analysis shows that, despite the absence of an informational advantage, the government can often increase social welfare by offering subsidized debt contracts. However, the paper also finds that some common credit subsidy policies, including loan guarantees and government backing of targeted lending institutions, yield constrained inefficient outcomes in general.

Self‐Policing and Optimal Law Enforcement When Violator Remediation is Valuable

This paper considers a model of probabilistic law enforcement in which a violator can undertake remediation that reduces the harm caused. In an optimal regime, violators are prompted to voluntarily remediate—or self‐police—by the promise of a reduced sanction when they do so. Self‐policing increases efficiency in two ways: (1) efficient remediation is achieved early and with certainty, rather than only when a violator is apprehended; and (2) the enforcement effort needed to deter violations is often reduced. Switching to a self‐policing enforcement regime leads optimally to less government enforcement activity and less deterrence.

Customer coalitions, monopoly price discrimination and generic entry deterrence

Abstract This paper analyzes the interplay between a profit-maximizing monopolist and a set of consumers who are able to form coalitions that bargain with the monopolist and/or integrate into production. We show that the monopolist will deter the formation of these ‘countervailing’ coalitions through strategic selection of ‘generic’ limit price offers to each consumer. These limit prices are derived as subgame perfect equilibria in two alternative models of customer- monopoly interplay. In both models, price discrimination emerges in environments wherein it has previously been considered unprofitable. Welfare analysis of the equilibria demonstrates the procompetitive effects of potential customer coalitions and generally provides an efficiency-based motivation for a government ban on price discrimination.

Stochastic pollution, costly sanctions, and optimality of emission permit banking

Abstract This paper identifies a new economic motive for pollution regulations that allow polluting firms to bank and borrow emission permits over time. When aggregate pollution is stochastic, an intertemporal permit trading regime can provide firms with efficient incentives for pollution abatement without the need for costly government enforcement actions that would otherwise be required.

Crop Insurance in a Political Economy: An Alternative Perspective on Agricultural Policy

Lawmakers often subsidize farmers in times of financial distress. This article models this political impulse as a constraint on government farm policy, describing how ex ante government farm insurance can deter ex post“disaster relief” and improve production incentives by countering the moral hazard that otherwise prevails. Absent ex ante government policy, ex post relief takes the form of revenue insurance, which prompts excessive entry into farm production and under-production by operating farmers. Ex ante government policy can raise economic and political welfare by buying out low productivity farmers and offering profitable farmers a combination of revenue insurance, price supports, and a program participation fee. Copyright 2003, Oxford University Press.

Optimal liability with stochastic harms, judgement-proof injurers, and asymmetric information1

Abstract This paper studies the use of ex post liability to regulate unilateral accidents when injurers have (1) different probability distributions for accident damages and, as a result, different optimal levels of accident prevention effort, (2) private information about their damage distributions, and (3) liability that is limited to the injurer’s available assets. When the asset bound on liability is in a plausible range, an optimal damage-contingent legal rule is shown to take a threshold form, assessing maximal liability when ex post damages are above a given threshold and zero liability otherwise.

Entry Deterrence By Non-Horizontal Merger

We study when and how pure non-horizontal mergers, whether cross-product or vertical, can deter new entry. Organizational mergers implicitly commit firms to more aggressive price competition. Because heightened competition deters entry, mergers can occur in equilibrium even when, absent entry considerations, they do not. We show that, in order to prevent a flood of entrants, mergers arise even when a marginal merger costs incumbent firms more than does a marginal entrant.

An Empirical Exploration of the Population-Environment Nexus in India

This article presents an empirical study of population growth and environmental change using cross-section district-level data from South, Central, and West India. Environmental change is measured using a satellite-based vegetation index. Unlike prior work, the analysis treats population growth and environmental change as jointly determined, distinguishes between rural and urban populations, and distinguishes between two components of population growth, natural growth and migration. Among key findings are that environmental decline spurs rural population growth and net rural in-migration, which prompt further environmental decline; environmental improvement spurs urban population growth and net urban in-migration; and environmental scarcity spurs environmental improvement. Copyright 2008, Oxford University Press.