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Monitoring, firms’ compliance and imposition of fines: evidence from the Federal Industrial Inspection Program in Mexico City

Published online by Cambridge University Press:  18 June 2013

Ninel Escobar  and
Carlos Chávez
Ninel Escobar
Affiliation:
World Wildlife Fund, México, Benjamín Hill 205 Col. Hipódromo, Del. Cuauhtemoc, México, D.F. E-mail: nescobar@wwfmex.org
Carlos Chávez
Affiliation:
Departamento de Economía, Universidad de Concepción, Chile, Research Nucleus on Environmental and Natural Resource Economics, and Interdisciplinary Center for Aquaculture Research (INCAR). E-mail: cchavez@udec.cl
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Abstract

We analyze the performance of the Federal Industrial Inspection Program operated by the Federal Attorney for Environmental Protection (PROFEPA) in Mexico City. We seek to answer three questions: What drives the inspections? What determines non-compliance? And what drives imposition of fines? We use firm-level data that identify certain characteristics of the firms, PROFEPA's inspections, compliance results and fines for all air polluting firms under the Program during the period January 2000–October 2008. We obtain three main results. First, PROFEPA's inspections have focused on larger firms devoted to industrial activities located in poor and dense municipalities. Second, past inspections were significant and have a high marginal effect on compliance. Third, the severity of the infraction was not relevant to the decision to impose a fine but rather to its amount.

Type
Research Article
Information
Environment and Development Economics , Volume 18 , Issue 6 , December 2013 , pp. 723 - 748
Copyright
Copyright © Cambridge University Press 2013 

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