Revisiting penalty functions for environmental violations: Evidence from a developing country

摘要

Environmental fines are effective means of bringing polluters under compliance by deterring them from future violations. The design of the fines is guided by policies informed by theories of firm behaviour and empirical records. In Bangladesh, there are no policies governing the penalty rates based on the type and seriousness of the violations. This study models the influence of factory level characteristics on environmental fines levied due to violation of regulations relating to surface water pollution. Textile factories were found to be fined at a higher rate compared to other sectors. It was also found that historical compliance records negatively influenced the penalty rates. However, even with this model it will be difficult to accurately assess the fine for an environmental violation. Though the results offer similarities and differences with other studies and established theories, certain anomalies highlight the regulatory gaps in terms of not having structured penalties appropriate for reported violations in Bangladesh.