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Occupational safety in a frictional labor market

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  • Kerndler, Martin

Abstract

This paper studies the provision of occupational safety when the labor market is subject to search frictions. While safety measures are costly for firms, they reduce workers' mortality. We show that the presence of search frictions decreases the socially optimal level of occupational safety relative to a frictionless labor market, leading to excess mortality. In a decentralized setting where wages and safety measures are bargained at the firm level, matching externalities and a labor supply externality may further reduce safety provision. We obtain conditions under which these externalities are internalized by firms and workers, and discuss the role of policy for promoting occupational safety. Calibrating the model to the US, we find that search frictions explain 8%-14% of the work-related mortality rate, which indirectly makes them the third largest cause of work-related death.

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  • Kerndler, Martin, 2022. "Occupational safety in a frictional labor market," ECON WPS - Working Papers in Economic Theory and Policy 02/2022, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    • Handle: RePEc:zbw:tuweco:022022
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    More about this item

    Keywords

    occupational safety; mortality; search frictions; Nash bargaining;
    All these keywords.

    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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