Monitoring of pollution regulation: Do local conditions matter?

Economists have greatly criticized regulations that impose uniform environmental standards. Such a critic ignores that the implementation of the standards may vary significantly across plants, thus giving rise in fact to non-uniform standards. The purpose of this paper is to analyze the determinants of the regulator's monitoring activities. We show that greater inspection effort, ceteris paribus, is allocated towards those plants whose emissions are likely to generate a higher level of damages. On the other hand, we show that the behavior of the regulator is also a function of variables that may not be directly related to abatement cost and damages. In particular, we show that variables pertaining to local labor market conditions have an impact on the monitoring strategy adopted by the regulator.