In this two-year field experiment in the Indian state of Gujarat, Duflo et al. (2013) altered the market structure for environmental audits of industrial plants to incentivize accurate reporting and showed that third-party auditors who are chosen and paid by the firms that they audit tend to systematically report plant emissions just below the legal standard. The treatment caused the auditors to report more truthfully and the treatment plants to reduce their pollution emissions.
Truth-Telling by Third Party Auditors and The Response of Polluting Firms: Experimental Evidence from India
