Self-Policing Statutes: Do They Reduce Pollution and Save Regulatory Costs?

State-level statutes provide firms that engage in environmental self-audits, and that self-report their environmental violations, a variety of regulatory rewards, including "immunity" from penalties and "privilege" for information contained in self-audits. This article studies a panel of state-level industries from 1989 through 2003, to determine the effects of the different types of statutes on toxic pollution and government inspections. We find that, by encouraging self-auditing, privilege protections tend to reduce pollution and government enforcement activity; however, sweeping immunity protections, by reducing firms' pollution prevention incentives, raise toxic pollution and government inspection oversight. The Author 2011. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.