nep-res New Economics Papers
on Resource Economics
Issue of 2020‒09‒14
two papers chosen by
Maximo Rossi
Universidad de la República

  1. Discretionary Exemptions from Environmental Regulation: Flexibility for Good or for Ill By Dietrich Earnhart; Sarah Jacobson; Yusuke Kuwayama; Richard T. Woodward
  2. Hassles and Environmental Health Screenings :Evidence from Lead Tests in Illinois By Gazze, Ludovica

  1. By: Dietrich Earnhart (University of Kansas); Sarah Jacobson (Williams College); Yusuke Kuwayama (Resources for the Future); Richard T. Woodward (Department of Agricultural Economics, Texas A&M University)
    Abstract: We model firm and regulator behavior to examine theoretically the use and consequences of discretionary exemptions (also known as variances, waivers, or exceptions) in environmental regulation. Many laws, such as the Clean Water Act, impose limits on harmful activities yet include ``safety valve'' provisions giving the regulator discretion to grant full or partial exemptions that provide permanent or temporary relief. This discretion begets flexibility over the law’s de facto stringency. Our model places a profit-maximizing pollution discharger under the purview of a fully informed regulator who imposes discharge limits. We show that when a regulation is otherwise inflexible, an exemption that relaxes the limit for high cost firms can improve social welfare by reducing the costs of achieving a level of environmental quality. We further demonstrate that if abatement technology improves in effectiveness over time, a temporary exemption can increase social welfare by adjusting abatement in response to dynamic conditions. We also show that if the labor market is sticky, exemptions can ``create jobs.'' If a regulator is driven by an unequally weighted social welfare function, she can use exemptions to meet redistributive ends. However, these beneficial impacts of exemptions rely on a fully informed and benevolent regulator; otherwise, the discretionary nature of exemptions leaves them open to abuse. A regulator who is captured by industry, focused only on her jurisdiction, or answerable to a set of elites can abuse exemptions in ways that reduce social welfare, such as allowing inefficiently high pollution or inducing a cost-ineffective pattern of abatement.
    Keywords: Variance, exemption, regulation, flexibility, discretion, welfare
    JEL: D21 D62 K32 Q52 Q53 Q58
    Date: 2020–04
  2. By: Gazze, Ludovica (University of Warwick)
    Abstract: I study the determinants of childhood lead screening using all Illinois birth records (2001-2014), matched to lead testing records and geocoded housing age data. Housing age measures lead risk, as older houses disproportionally have lead paint. Changes in providers’ availability, inferred from testing data, provide variation in non-monetary costs of testing. Travel costs reduce screening among low- and high-risk households alike. Thus, self-selection based on travel costs does not appear to improve targeting, even though high-risk households are willing to pay $29-389 more than low-risk households for screening. Screening incentives would be cost-effective for reasonable values of lead poisoning externalities. JEL codes: I1 ; Q52
    Date: 2020

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