The Effect of Inspector Group Size and Familiarity on Enforcement and Deterrence

This paper provides new insights into the productivity of teams and the relationship between the inspector and the inspected party by examining data on inspections of oshore oil and gas platforms in the Gulf of Mexico. We exploit weather patterns that only influence the number of inspectors that are sent to inspect a platform and show that inspector group size matters; an additional inspector results in more severe sanctions being issued. We also exploit the agglomeration of two inspection offices to examine the effect of reducing the familiarity between an inspector and an inspected party; we find that reducing the inspector-offender relationship also results in more severe sanctions being issued. Combined, these findings are consistent with regulatory capture and related concerns about insulating inspectors from undue influence by those they are supposed to monitor. Using these shifts in sanction severity we also estimate the effectiveness of increasing enforcement on the deterrence of incidents, such as oil spills, res, injuries, or fatalities. We only find weak evidence that increasing sanction severity increases deterrence.