arbiter
JournalsAccount

Dynamic Regulation with Firm Linkages: Evidence from Texas

Matthew Leisten & Nicholas Vreugdenhil

The Review of Economic Studies2026https://doi.org/10.1093/restud/rdag013article
FT50AJG 4*ABDC A*
Weight
0.37

Abstract

We evaluate the efficiency of dynamic linked environmental regulation. Linked regulation allows inspectors who uncover violations at one plant to increase future enforcement at other plants that share a common owner. When compliance costs are correlated, regulators can then target scarce enforcement resources towards bad actors without inspecting everyone. We develop an empirical framework of dynamic moral hazard under linked regulation that allows for large portfolios of plants and for choices to be interdependent within the portfolio of plants and across time. Using the framework we evaluate a linked regulation scheme in Texas and find that linked regulation performs substantially better than both unlinked regulation and untargeted regulation. We test two alternative theoretical mechanisms that underpin the benefit—a “firm-wide moral hazard mechanism” and a “correlated targeting mechanism”—and find that a large share of the value of linked regulation is due to the former.

1 citation

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1093/restud/rdag013

Or copy a formatted citation

@article{matthew2026,
  title        = {{Dynamic Regulation with Firm Linkages: Evidence from Texas}},
  author       = {Matthew Leisten & Nicholas Vreugdenhil},
  journal      = {The Review of Economic Studies},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1093/restud/rdag013},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Dynamic Regulation with Firm Linkages: Evidence from Texas

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.