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2.1 MSEK grant for the research project: “Penalties in cash or in kind?”

SITE researcher Pamela Campa and Lucija Muehlenbachs, from University of Calgary, won 2.1 MSEK from FORMAS annual grant for Research and Development early career projects.

This project will empirically study the costs and benefits of sanctioning an environmental violation using an in-kind penalty as opposed to a cash penalty.  Court cases often result in in-kind penalties (for example, settlements for corporate violations have included funding for education programs, independent research, and public parks). While in-kind penalties are abundant, their implications as compared to cash penalties have yet to be evaluated in the economics literature.

In this project Pamela Campa and Lucija Muehlenbachs will leverage a rich record of court cases for environmental violations kept by the US Environmental Protection Agency to investigate three interrelated questions: (1) do in-kind penalties limit the severity of a sanction as compared to cash penalties? And if so, (2) do in-kind penalties limit the deterrence of future violations? On the other hand, (3) are in-kind penalties fulfilling their promise of targeting environmental improvements to areas disproportionately exposed to pollution? To study these questions, Pamela Campa and Lucija Muehlenbachs will estimate the differential impact of in-kind versus cash penalties on firms’ share prices and firms’ future environmental compliance, as well as the differential occurrence of these penalties across the U.S.  Overall, the proposed research will assess the impact of in-kind penalties on the deterrence of environmental violations and the promotion of environmental justice, thus offering insights on policies to ensure environmental protection and equality.

For more info, contact Pamela Campa (Pamela.Campa@hhs.se).

FORMAS