An Economic Analysis of Information Disclosure and Industrial Waste Policies

Abstract

In this paper we consider the design of environmental policies for illegal waste disposal problems using a model that consists of the firm and administration. The first feature of this paper introduces the penalty for evasive action by a firm that illegally disposes wastes. The second clarifies the influence information disclosures exert on policy design by comparison analysis of the disclosure of information on the monitoring budget (information disclosure strategy) and no disclosure (information closed-door strategy). The main conclusions of this paper are as follows. The first conclusion of this paper is different from Becker (1968) that insists that it is necessary to raise the penalty level to the upper bound. That is, we showed that the penalty level should not be increased to the upper bound because the larger penalty level promotes evasion of the penalty. The second conclusion is that the monitoring budget under the information disclosure strategy is larger than under the information closed-door strategy. Also we showed that the penalty level under the information disclosure strategy is smaller than under the information closed-door strategy.JEL Classification: Q28, Q29