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Occupational safety and profit maximization: Friends or foes?

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  • Yakovlev, Pavel
  • Sobel, Russell S.

Abstract

The rise of the Industrial Revolution is often depicted as a cause of hazardous working conditions and is skillfully epitomized in William Blake's tale of a child chimney sweeper. Conventional wisdom puts firm profit in conflict with occupational safety. We reexamine this argument noting that injuries are very costly to firms because they lead to higher wage premiums, worker compensation, and costly work stoppages. We hypothesize that it is precisely for these reasons that firms in the industries with dangerous working conditions have the strongest incentives to innovate and substitute more capital for labor. Using a longitudinal panel of U.S. industries, we test and confirm our hypothesis that higher injury rates lead to higher capital stock per worker, over time. Moreover, our estimates suggest that firms provide more capital and equipment per worker than what would have been there based solely on the compensating wage differential.

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  • Yakovlev, Pavel & Sobel, Russell S., 2010. "Occupational safety and profit maximization: Friends or foes?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(3), pages 429-435, June.
    • Handle: RePEc:eee:soceco:v:39:y:2010:i:3:p:429-435
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    References listed on IDEAS

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    Cited by:

    1. Pascale Lengagne, 2016. "Experience Rating and Work-Related Health and Safety," Journal of Labor Research, Springer, vol. 37(1), pages 69-97, March.
    2. das Chagas Moura, Márcio & Azevedo, Rafael Valença & Droguett, Enrique López & Chaves, Leandro Rego & Lins, Isis Didier & Vilela, Romulo Fernando & Filho, Romero Sales, 2016. "Estimation of expected number of accidents and workforce unavailability through Bayesian population variability analysis and Markov-based model," Reliability Engineering and System Safety, Elsevier, vol. 150(C), pages 136-146.
    3. Pascale Lengagne, 2015. "Workers Compensation Insurance: Incentive Effects of Experience Rating on Work-related Health and Safety," Working Papers DT64, IRDES institut for research and information in health economics, revised Jan 2015.
    4. Dzonzi-Undi, Junice & Li, Shixiang, 2016. "Safety and environmental inputs investment effect analysis: Empirical study of selected coal mining firms in China," Resources Policy, Elsevier, vol. 47(C), pages 178-186.

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