Journal of Regulatory Economics

, Volume 40, Issue 3, pp 279–302

Do environmental audits improve long-term compliance? Evidence from manufacturing facilities in Michigan

Original Article

DOI: 10.1007/s11149-011-9163-2

Cite this article as:
Evans, M.F., Liu, L. & Stafford, S.L. J Regul Econ (2011) 40: 279. doi:10.1007/s11149-011-9163-2


Using a unique facility-level dataset from Michigan, we examine the effect of environmental auditing on manufacturing facilities’ long-term compliance with U.S. hazardous waste regulations. We also investigate the factors that affect facilities’ decisions to conduct environmental audits and whether auditing in turn affects the probability of regulatory inspections. We account for the potential endogeneity of our audit measure and the censoring of our compliance measure using a censored trivariate probit, which we estimate using simulated maximum likelihood. We find that larger facilities and those subject to more stringent regulations are more likely to audit; facilities with poor compliance records are less likely to audit. However, we find no significant long-run impact of auditing on the probability of a regulatory inspection or compliance among these Michigan manufacturing facilities.


Environmental auditing Hazardous waste Compliance Enforcement 

JEL Classification

Q53 Q58 L51 

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  • Mary F. Evans
    • 1
  • Lirong Liu
    • 2
  • Sarah L. Stafford
    • 3
  1. 1.The Robert Day School of Economics and Finance, Claremont McKenna CollegeClaremontUSA
  2. 2.Department of Economics and International BusinessSam Houston State UniversityHuntsvilleUSA
  3. 3.Department of EconomicsCollege of William and MaryWilliamsburgUSA

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