Environmental regulations may cause firms to reoptimize over pollution inputs. By regulating air emissions in particular counties, the Clean Air Act (CAA) gives firms incentives to substitute toward polluting other media, like waterways, and toward pollution from plants in other counties. I test these hypotheses using the EPA Toxic Release Inventory (TRI). Regulated plants increase their ratio of water-to-air emissions by 177% (102 log points) and their level of water emissions by 105% (72 log points). Regulation of an average plant increases air emissions at unregulated plants within the same firm by 11

Government regulation of firms is associated with more negative externalities and unofficial activity across countries. I argue that this correlation mainly reflects causality going from concerns about market failures to demand for government intervention. Using trust in others as a proxy for such concerns, I show that differences in trust explain a great deal of variation in entry regulations. Then, controlling for trust in the regression of market failures on regulation, the latter is no longer associated with worse economic outcomes. The same result is confirmed when I exploit country population as an alternative source of variation in regulation

Recent economic literature has given a great deal of attention to the behavior of the firm under a regulatory constraint. Such efforts include theoretical extensions of the classic article by Averich and Johnson (1962) by Kennedy (1977), as well as empirical tests of the overcapitalization hypothesis by Leland (1974), Smithson (1978) and Spann (1974). In addition, there have been notable attempts to provide a general theory of regulation by Stigler (1971) and Peltzman (1976). Against this background, surprisingly little attention has been paid to the effect of regulation on the compensation of chief executive officers. The effect of regulation on executive rewards strikes at the heart of why regulated firms appear to behave differently than their less regulated counterparts. The only explicit attempts to relate executive compensation to the presence of regulation appear to be the work of Smyth, Boyes and Peseau (1975) and Ciscel (1977). The apparent oversight of this issue is perhaps best explained by the persistence of the controversy over the nature of the objective function of corporate decision makers introduced as the maximization' hypothesis by Baumol (1967). For the last two decades, the debate over whether corporate decision makers maximize sales or maximize profits has been couched in either-or terms. Proponents of each side of the debate, like Smyth, Boyes and Peseau (1975) and Ciscel (1974) on the managerialist side, and Lewellen and Huntsman (1970) and Masson (1971) on the neoclassical side, have produced evidence for their respective positions. Ciscel and Carroll ( 1980) provide an econometric resolution of the conflict, pointing out the compatibility of the data with both hypotheses, given a proper specification of the compensation-performance equations. Consideration of the impact of regulation on executive rewards has significance for understanding the different rewards in the regulated sectors and it illuminates the implicit incentives for executive behavior in regulated and unregulated firms. Maximum profits or optimal sales can never be directly observed. All that can be measured is whether or not the pattern of executive compensation is consistent with such maximization objectives. This aspect of economic analysis is particularly important when gauging the effect of regulation on executive pay. The impact of the absence of regulation on compensation can be contrasted to two alternatives: regulation establishes maximum prices as is the case in utilities, while regulation prescribed minimum prices as was the case in the transportation sector (see Jordan, 1972). Executive compensation reflects not only incentive changes brought about by the existence of regulation, but also the form regulation takes

We examine the effect of air quality regulation on productivity in some of the most heavily regulated manufacturing plants in the United States, the oil refineries of the Los Angeles (South Coast) Air Basin. We use direct measures of local air pollution regulation to estimate their effects on abatement investment. Refineries not subject to these regulations are used as a comparison group. We study a period of sharply increased regulation between 1979 and 1992. Initial compliance with each regulation cost $3 million per plant and a further $5 million to comply with increased stringency. We construct measures of total factor productivity using Census of Manufacturers output and materials data that report physical quantities of inputs and outputs for the entire population of refineries. Despite high costs associated with the local regulations, productivity in the Los Angeles Air Basin refineries rose sharply between 1987 and 1992, which was a period of decreased refinery productivity in other regions. We conclude that abatement cost measures may grossly overstate the economic cost of environmental regulation as abatement can increase productivity

The effects of various regulations on hospital costs are estimated using a two decade long panel data set which spans the initiation, and in some instances the repeal, of various forms of hospital regulation. The long panel fosters two improvements over previous research. First, as state hospital cost levels may affect states' incentive to regulate, fixed effect estimators alleviate omitted variable bias derived from the states' regulatory discretion. Second, the long panel permits the estimation of many different regulatory program effects, but also facilitates the analysis of potential regulatory program interaction. The empirical results suggest that previous studies have exaggerated regulatory cost savings: although some interaction effects are indicated, hospital costs appear unresponsive to most regulatory programs

Tim R. Sass, J. Paul Leigh, The Market for Safety Regulation and the Effect of Regulation on Fatalities: The Case of Motorcycle Helmet Laws, The Review of Economics and Statistics, Vol. 73, No. 1 (Feb., 1991), pp. 167-172

To control the deer population, state game commissions regulate the types of deer that can be legally harvested. These regulations, however, might have an unintended effect on hunting-related accidents by changing the care hunters take when firing their rifles—a moral hazard effect—or changing the composition of hunters. Using detailed data on hunting accidents and regulations in Pennsylvania counties from 1990 to 2005, we find compelling evidence that harvesting restrictions increase the care hunters take in a manner consistent with moral hazard. Thus, these regulations have a positive safety externality

E CONOMISTS have long recognized the desirable qualities of a competitive market. The milk industry, although it might appear to be a prototype competitive market, is far from competitive. This is due in part to locational factors and in part to a vast network of federal and state governmental regulations and controls. Over 95% of raw milk sales to processing plants are regulated, and in 1972 about a quarter of all wholesale and retail sales of fluid milk products, the concern of this paper, were regulated (USDA, 1972). As a result of increased interest in regulation in general, economists have become increasingly concerned with milk regulation. I Furthermore, some states have recently dropped wholesale and retail price regulation. The implications of these various government controls are important to both consumers and public policy makers. Some studies have found that state retail price regulation leads to higher prices.2 Economic theory also predicts that insulation from price competition may have significant effects on the number of participants and the efficiency of production in an industry. The previous studies have failed to consider the structural implications of wholesale and retail price regulation. This paper notes the announced and implied objectives of state retail fluid milk price regulation. Application of the Chamberlinian monopolistic competition model will aid in heuristically contrasting unregulated and regulated equilibria. Empirically, a simultaneous equations model will be used to study the effects of regulation upon both the performance and structure of the fluid milk industry. Further, an estimate of the social cost of regulation will be deduced from the empirical results. Finally, the implications for public policy will be presented

We study how various zoning regulations combine to affect housing supply, prices, and rents of single- and multifamily homes using novel lot-level zoning data from Greater Boston and a cross-sectional boundary discontinuity design at regulation boundaries. Looser density restrictions, alone or with other less restrictive regulations, are most effective in increasing supply and reducing per-housing-unit rents and prices. We theoretically and empirically show that restrictive zoning regulations shift housing stock towards larger units, increasing prices per housing unit. Counterfactuals imply that a recent Massachusetts law increasing building density near transit can reduce long-run rents and prices, particularly in suburbs

I examine the effects of FCC regulation on the innovation and introduction of advanced telecommunications services in the United States. An interim of lighter regulation provides an "experiment" to test the regulatory regime's impact. The econometric model comprises an arrival process (for service innovation) followed by a duration process (for regulatory delay). The number of services the firms created during the interim is 60%-99% higher than the model predicts they would have created if the stricter regulation had still been in place. Overall, firms would have introduced 62% more services to consumers during the study period if the regulation had not been in place