Seminario Does Greater Policy Intensity Improve Policy Effectiveness? Evidence from Seoul, South Korea

Abstract

Many policies in practice become gradually more intensive over time in the hope of becoming more effective. While stricter policies may enhance compliance, they may also encourage loophole exploiting behaviors that offset intended policy benefits. If the increase in loophole exploitation outweighs the increase in compliance, overall policy effectiveness can actually decrease when a policy is intensified. I exploit the gradual intensification of Seoul’s vehicle control policy —an increasingly common policy instrument shaping pollution exposures in cities globally. In my theoretical framework, I model individual decisions to comply, exploit loopholes, or violate the policy outright, and assess how these responses vary with policy stringency. Empirical results support the theoretical prediction that higher policy intensity can induce greater loophole exploitation. I find loophole exploiting behaviors— driving outside regulated hours (before 6 a.m. or after 9 p.m.)—increased with policy tightening. Across multiple tightening events, the most stringent phase led to a 19% rise in loophole exploitation, the next to 13%, and the least stringent to 7%. I find a deterioration in air quality (PM10, PM2.5) during non-crackdown hours due to loophole exploitation. The resulting net health costs underscore the potential unintended consequences of intensified regulation. I emphasize the need to consider both the health benefits from policy compliance and the health costs from loophole exploitation to accurately estimate the true health impact of policy intensification.