Truth Hurts? Mandatory Environmental Information Disclosure and Regulatory Activities

Abstract

This paper examines the impacts of mandatory environmental information disclosure policy on the implementation of traditional command-and-control environmental regulations in the context of the Toxics Release Inventory (TRI), which is a major environmental information disclosure program in the United States, and the Clean Air Act (CAA). With a difference-in-differences research design that exploits TRI’s expansion of industry coverage in 1998, which has applied TRI’s disclosure requirements only to larger facilities in the newly covered industries, I find that regulators significantly increased the numbers of CAA inspection activities on facilities that started to disclose information in the TRI, while the numbers of CAA enforcement activities did not change. Complementing the large body of literature that investigates various stakeholders’ responses to information disclosure policy, the findings suggest regulatory response is also an important mechanism for the efficacy of information disclosure policy. They also highlight the strong intercorrelations between different forms of environmental policy.