A RECONSIDERATION OF ENFORCEMENT LEVERAGE WHEN PENALTIES ARE RESTRICTED

Harrington's (1988) model of state-dependent enforcement of pollution standards indicates the potential for significant reductions in monitoring cost. However, this approach results in firms with identical pollution cost functions polluting at different levels and thereby failing to minimize control cost for a given total pollution reduction. Derivations indicate that a state- independent approach with a modified standard will often yield a lower sum of pollution control and monitoring cost for a given level of pollution control. © 1991.