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

We investigate whether increased competition among inspection firms leads to an increase in the inspection pass rate in the Swedish car inspection market, which is heavily regulated and consciously designed to mitigate incentives to violate government regulations. We use a panel dataset that represent 22.5 million car roadworthiness tests that were conducted during the period 2010–2015. Fixed effects and instrumental variable estimations, which...