Quota enforcement in resource industries: self-reporting and differentiated inspections

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Quotas are frequently used in the management of renewable resources and emissions. However, in many industries there is concern about their basic effectiveness due to non-compliance. We develop an enforcement model of a quota-regulated resource and focus on a situation with significant non-compliance and exogenous constraints on fines and enforcement budget. We propose a new enforcement system based on self-reporting of excess extraction and explicit differentiation of inspection rates depending on compliance history. We use differentiated inspections to induce firms to self-report excess extraction. This system increases the effectiveness of the quota by allowing the regulator to implement a wider range of aggregate extraction targets than under traditional enforcement, while ensuring an efficient allocation of extraction. In addition, inspection costs can be reduced without reductions in welfare.
Translated title of the contributionKvotehåndhævelse i ressource-industrier: selvangivelse og differentieret inspektion
Original languageEnglish
JournalEnvironmental and Resource Economics
Volume58
Issue number4
Pages (from-to)539-562
Number of pages24
ISSN0924-6460
DOIs
Publication statusPublished - 2014

Bibliographical note

Published online 4 August 2013

ID: 99926873