Should you turn yourself in? The consequences of environmental self‐policing

Facilities that self‐police under the Environmental Protection Agency's Audit Policy are eligible for reduced penalties on disclosed violations. This paper investigates whether self‐policing has additional consequences; in particular, whether self‐policing reduces future enforcement activity. Using data on U.S. hazardous waste enforcement and disclosures, I find that facilities that self‐police are rewarded with a lower probability of inspection in the future, although facilities with good compliance records receive a smaller benefit than facilities with poor records. Additionally, facilities that are inspected frequently are more likely to disclose than facilities that face a low probability of inspection. The results suggest that facilities may be able to strategically disclose in order to decrease future enforcement. © 2007 by the Association for Public Policy Analysis and Management