Do Policies with Limited Enforcement Reduce Harm? Evidence from Transshipment Bans

Abstract

To mitigate environmental and social harm, policy-makers often provide incentives or impose sanctions to discourage harmful behavior. Such policies are usually implemented with limited monitoring capabilities, which may cause strategic behavior that leads to unintended consequences. Three related questions for any policy are therefore: do targeted agents comply on elements that are visible (visible compliance), do agents behave strategically to undermine the policy (effectiveness), and are raw material prices affected (economic cost)? We study these questions empirically in the context of a zero-tolerance policy (a ban) on seafood transshipments on the high seas --- a ban imposed because seafood transshipments are associated with illegal fishing and widespread forced labor. Novel satellite-based datasets, available ex-post several years after implementation of the ban, offer a unique opportunity to study the effect of the ban in hindsight. Combining satellite-based and economic datasets, and exploiting variation across regions and over time, we find that a ban reduces the yearly growth in transshipment rates by an estimated 58% despite significant monitoring challenges, and does not cause appreciable strategic behavior. A difference-in-differences analysis of landing prices suggests that this reduction comes at an estimated cost of 3% higher raw material prices.