Compliance and enforcement: Air pollution regulation in the US steel industry

We use data on individual steel plants to study the relationship between regulators' enforcement of air pollution regulations and firms' compliance decisions. We find the expected interactions between the decisions: at the plant level, greater enforcement leads to greater compliance, while greater compliance leads to less enforcement. We also test whether differences in firms' characteristics affect either compliance or enforcement decisions at the plant level, holding plant characteristics constant, and find that they seem to matter more for enforcement than for compliance. (C) 1996 Academic Press, Inc.