Although regulatory agencies are charged with a wide variety of important oversight responsibilities, little empirical work has been done on the actual performance of these agencies in carrying out their day-to-day monitoring activities. A variety of different models have been proposed to analyze relations between a regulator or auditor, and those regulated or audited, but tests of the theoretical models are rare. The proposed research examines regulatory performance by studying the safety regulation activities of the U. S. Coast Guard (USCG). Since many of the USCG's safety-related activities are in the nature of inspections and monitoring, this provides a rich and relevant context in which to examine some general implications from the theoretical literature. The research plan involves use of new empirical methods and tests designed to be tightly connected to the underlying theory. A major goal of the research is to use the results of these tests to evaluate the predictions of existing models, and thus provide guidance for the direction in which these models should be extended, or new models should be built. While the data to be analyzed are from a single government entity, the theoretical, empirical and public policy problems addressed apply to a wide variety of enforcement agencies, and also to agencies confronting problems such as the effective control of health spending. A further goal of the proposed research involves specific analysis of USCG operations, with a view to assessing their effectiveness in reducing the expected number of casualties on U.S. flag vessels. These estimations will serve as a scientific basis for guiding allocation of inspection budgets among different inspection offices across the U.S., or among different types of vessels. Because the analysis will produce measures of the effectiveness of additional money spent on inspections, it will also allow the researchers to assess how constrained the USCG inspection budget is. Finally, the researchers will be able to ask how the government can facilitate and make USCG activities more efficient by computing the optimal (as opposed to the existing) amount of penalties that would enable a socially optimal safety result.
