| Abstract: |
In Chile, like in other developing countries, many plants avoid complying with
environmental regulations because monitoring and enforcement are infrequent.
On the other hand, some plants overcomply because their abatement decisions
are strongly affected by factors other than formal regulation. This seems
counterintuitive, because firms do not have incentives to comply with
environmental regulation when there is a lack of enforcement. However, firms’
managers sometimes respond to other sorts of incentives. When firms face a
lack of formal regulation, they may comply because they see incentives other
than conventional enforcement. These can take the form of community pressure
and sanctions from market agents in the form of informal regulation. Indeed,
it seems that conventional policy discussion has been too narrow, focusing
only on the firm-state interaction as the single determinant of environmental
performance. Therefore, the central objective of this paper is to analyse the
impact of formal and informal regulation on the level of compliance of firms
with environmental regulation. Informal regulation includes two new agents,
the community (local or neighbouring community, community groups or NGOs) and
the market (market agents such as consumers and investors), which also
participate in the process of environmental regulation through private
enforcement. This paper also analyses the impact of plants’ and firms’
characteristics on their environmental performance. This research uses new
evidence from a survey carried out in 700 Chilean manufacturing plants. The
multivariate results suggest that in Chile there is a scope for strategies
that complements conventional policy regulations. |