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Abstract

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