Competition Makes Inspectors More Lenient: Evidence from the Motor Vehicle Inspection Market

Research output: Working paper

Abstract

We examine the impact of competition on a firm's incentive to relax the standards of its inspection to its customers in the Swedish motor vehicle inspection market, which is heavily regulated and consciously designed to mitigate incentives to deviate from the regulation. We use a panel dataset representing 22.5 million car roadworthiness tests during the period 2010--2015. Fixed effects and instrumental variable estimations, which are used to account for the endogeneity of competition, show that inspection stations that operate in highly competitive markets are more lenient to their customers than stations that operate in less competitive markets.

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Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics

Keywords

  • leniency, pass rate, inspection behavior, competition, deregulation, inspection market, D22, L11, L84
Original languageEnglish
PublisherDepartment of Economics, Lund Universtiy
Publication statusPublished - 2017
Publication categoryResearch

Publication series

NameWorking Papers
PublisherDepartment of Economics, Lund University
No.2017:19

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