PENALTY-FUNCTIONS FOR ENVIRONMENTAL VIOLATIONS - EVIDENCE FROM WATER-QUALITY ENFORCEMENT

We empirically estimate a penalty function for water quality violation s of private firms in Georgia. We find that seriousness of infraction and historical compliance records strongly influence penalty levels, w hile the intentionality of violations and the method of discovery do n ot. The size of the polluting company is also an important determinant of financial penalties. Overall the results support the plausibility of modeling assumptions used in much the theoretical enforcement liter ature but indicate the need for caution in interpreting models that as sume penalty amounts are invariant to Violation characteristics.