The Politics of Regulatory Compliance and Enforcement

In a recent article, I compile a comprehensive toolkit for researchers investigating political influences on enforcement, compliance, and corporate governance outcomes. I review different conceptualizations of politics in regulatory theory. I collect both qualitative and quantitative empirical studies that have attempted to operationalize the construct of “politics” as a variable and test its influence on regulatory enforcement and compliance outcomes. And I analyze these studies to identify the categories of political variables that researchers most commonly use, the merits and limitations of different approaches, and key gaps in the literature to be addressed in future research. The aim of this project is to bring together scholarship across disciplines that rarely speak but have much to say to one another on this subject to constitute a field around the politics of regulation.

I was, frankly, surprised and heartened to find so many studies making serious attempts to measure the political influences on compliance and enforcement. Existing studies have investigated the impact of political variables ranging from pressure by elected officials, to interest group support or opposition, to public opinion, to micro-level interactions between regulators and regulated entities. But there are serious limitations to the existing body of research. First, there has not been much dialogue across studies on the subject of political influence. This makes it difficult to synthesize and generalize findings in the literature because researchers are operating largely in isolation from one another. Second, political variables are often under-theorized, included on an ad hoc basis without much consideration to the role they play relative to other influences on regulatory outcomes. This obscures the mechanisms by which political influences operate.

Take, for example, the existing literature on public opinion and regulatory enforcement. Existing research tends to elide both the direction and the pathways of public opinion’s influence. While many studies find a relationship between public attitudes about regulation and enforcement levels, they often fail to consider the direction of causality. The assumption tends to be that public opinion influences enforcement levels and the enforcement styles adopted by regulators. But it is also possible that public opinion about regulation is, itself, shaped by the way regulators enforce the law. Assuming that public attitudes do, indeed, influence regulators’ practices, studies fail to explain how such influence is exerted. Is it because politicians pressure regulators to address problems that concern their constituents? Do regulators respond directly to public demands, without the intervention of politicians? Are regulators’ own preferences constructed by those around them in the broader public? The answers to these questions are essential for understanding what drives regulatory outcomes.

While my focus in this article is on empirical studies of regulatory enforcement and compliance, the toolkit I compile should also be of interest to corporate governance scholars. Like scholars of regulation, corporate governance scholars often focus narrowly on the characteristics of boards and their members to explain firm performance. But these characteristics are always embedded in webs of social and political variables. Studies attending to these variables can provide more nuanced explanations of how corporate governance influences performance outcomes.

It is not news to say that politics influences regulatory enforcement and compliance. Broadly speaking, enforcement priorities and compliance expectations are shaped by the political climate. More controversially, presidential administrations sometimes decline to enforce regulations they disfavor. Recently, we have seen ever more brazen examples of political influence on regulatory enforcement, including investigations targeted at political rivals and hyper-politicized review of transactions with Chinese companies.

Yet, empirical studies of regulatory enforcement and compliance outcomes have been stubbornly blind to political explanations for these outcomes. Researchers look for explanations in regulatory program design or in the characteristics of the regulator, but rarely in politics. Studies that focus exclusively on the technocratic features of regulation assume that agencies are operating in a Weberian bureaucratic utopia defined by meritocracy, political insulation, expertise, and rationality. Unfortunately, this orientation to empirical scholarship on regulation ignores the reality that a generation of deregulation, regulatory reform, anti-statist political rhetoric and creeping presidential control over regulators has left many agencies in the U.S. and other wealthy, Western democracies resource-starved, beholden to regulated industry, and managed by political cronies. And this blind spot impedes researchers’ and policymakers’ ability to understand what really drives enforcement and compliance outcomes.

Let me be clear: this is not another rant about agency capture. Rather, it is a call for empirical researchers to pay more attention to variations in political context and how they influence enforcement of and compliance with regulation. Researchers and policymakers too often make empirical claims about regulation that ignore such variation. Take, for example, the common claim that cooperative approaches to enforcement yield better compliance outcomes than punitive approaches. Do compliance responses to cooperative interventions vary depending on the political context in which they are adopted? Similarly, it is common wisdom that more inspections yield better compliance. But we know little about the political drivers of inspection targeting, how the politics of targeting influence the effect of inspections on compliance, or how the broader political context mediates the impact of inspections on behavior.

The theoretical and empirical tools for addressing these questions are not well developed. Theories of the politics of regulation – like capture theory – are highly stylized and tend to focus on the politics of policy adoption rather than implementation. Highly influential game theoretic accounts of enforcement and compliance explicitly omit political variables. Empirical tools are similarly limited, and empirical researchers interested in these questions have mostly muddled through on their own. My article provides the scaffolding to build a meaningful dialogue across studies, disciplines, and methodologies to address these issues. In an increasingly politicized regulatory environment, understanding when and how regulation and governance work requires understanding how both are shaped by politics.

This post comes to us from Professor Jodi L. Short at the University of California Hastings College of the Law. It is based on her recent paper, “The Politics of Regulatory Enforcement and Compliance: Theorizing and Operationalizing Political Influences,” published in Regulation & Governance and available here.

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