Discretion and Manipulation by Experts: Evidence from a Vehicle Emissions Policy Change

Environmental regulation seeks to limit pollution through strict emissions thresholds for existing cars, yet it remains unclear how frequently inspectors enforce these regulations and what impact test manipulation has on policy efficacy. We demonstrate (1) that there is a distinct discontinuous drop in the distribution of emissions results at the regulatory threshold (2) that when the state tightens emissions standards, over 50% of the vehicles newly at risk for failure now pass instantaneously after the regulation changes. These improvements cannot be explained by legitimate repairs but are consistent with facilities exploiting procedural discretion in order to help consumers evade the strengthened regulations.