Speaker Tina Andarge - Major/Minor Thresholds in Environmental Regulations (Joint with Will Wheeler)
- Event Type
- Seminar/Symposium
- Sponsor
- ACE (Dept of Agricultural and Consumer Economics)
- Location
- 428 Mumford Hall
- Virtual
- Join online
- Date
- Nov 14, 2025 12:00 - 1:00 pm
- Speaker
- Dr. Tina Andarge, Assistant Professor, University of Massachusetts Amherst
- Views
- 16
Abstract
Thresholds are widely used to determine important outcomes (e.g., regulatory stringency, size, etc.) in environmental regulation. When expected compliance costs are drastically different below and above the threshold, it may provide agents an incentive to manipulate their data such that they are on the favorable side of the threshold. We focus on regulatory thresholds that determine regulatory stringency. For example, under the Clean Water Act (CWA), most major/minor determinations for publicly owned treatment works (POTWs) are based on the total design flow of the facility; facilities with a total design flow exceeding 1 million gallons per day (MGD) are classified as majors. Compared to minor facilities, major facilities must monitor for more pollutants and are inspected more frequently, both of which increase expected compliance costs. This potentially provides an incentive to manipulate values of design flow as a strategy for regulatory avoidance. We first examine whether major facilities face a more stringent regulatory regime. Consistent with EPA policy, we find a large drop in inspection frequencies for facilities just below the major/minor threshold. Second, using bunching estimators, we find evidence of regulatory avoidance at this threshold. Additional analysis is somewhat suggestive of regulatory avoidance leading to poorer environmental performance.