Abstract

Abstract: We analyze the performance of the Federal Industrial Inspection Program operated by the Federal Attorney for Environmental Protection (PROFEPA) in Mexico City. We seek to answer three questions: What drives the inspections? What determines non-compliance? And what drives imposition of fines? We use firm-level data which identifies certain characteristics of the firms, PROFEPA’s inspections, compliance results and fines for all air polluting firms under the Program during the period January 2000-October 2008. We identify three main results. First, PROFEPA’s inspections have focused on larger firms devoted to certain industrial activities, and which are located in poor and dense municipalities. Second, past inspections were significant in inducing future compliance and have a high marginal effect. Third, the seriousness of infractions was not relevant in the decision whether or not to impose a fine, but it was relevant to the amount of the fine if any was imposed.