Journal of Economic Literature (JEL) Code(s)
K42, O1, L51
Attempts to curb illegal activity by enforcing regulations gets complicated when agents react to the new regulatory regime in unanticipated ways to circumvent enforcement. We present a research strategy that uncovers such reactions, and permits program evaluation net of such adaptive behaviors. Our interventions were designed to reduce over-ﬁshing of the critically endangered Paciﬁc hake by either (a) monitoring and penalizing vendors that sell illegal ﬁsh or (b) discouraging consumers from purchasing using an information campaign. Vendors attempt to circumvent the ban through hidden sales and other means, which we track using mystery shoppers. Instituting random monitoring visits are much more eﬀective in reducing true hake availability by limiting such cheating, compared to visits that occur on a predictable schedule. Monitoring at higher frequency (designed to limit temporal displacement of illegal sales) backﬁres, because targeted agents learn faster, and cheat more eﬀectively. Sophisticated policy design is therefore crucial for determining the sustained, longer-term eﬀects of enforcement. Data collected from ﬁshermen, vendors, and consumers allow us to document the upstream, downstream, spillover, and equilibrium eﬀects of enforcement on the entire supply chain. The consumer information campaign generates two-thirds of the gains compared to random monitoring, but is simpler for the government to implement and almost as cost-eﬀective.
González Lira, Andrés and Mobarak, Ahmed Mushfiq, "Enforcing Regulation under Illicit Adaptation" (2018). Cowles Foundation Discussion Papers. 124.