Discretion and Manipulation by Experts : Evidence from a Vehicle Emissions Policy Change

Environmental regulation seeks to limit pollution through strict emissions thresholds for existing cars, yet it remains unclear how frequently inspectors enforce these and what impact test manipulation has on policy efficacy. We demonstrate (1) a strong discontinuity in the emissions results distribution, with vehicles expected to barely fail missing from the data; and (2) When the state tightens emissions standards, over 50% of vehicles newly at risk show instantaneous test improvements. These improvements cannot be explained by legitimate repairs and are consistent with facilities exploiting procedural discretion in order to help consumers evade strengthened regulations