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Occupational safety and profit maximization: Friends or foes?


  • Yakovlev, Pavel
  • Sobel, Russell S.


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.

Suggested Citation

  • 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

    1. Hersch, Joni, 1998. "Compensating Differentials for Gender-Specific Job Injury Risks," American Economic Review, American Economic Association, vol. 88(3), pages 598-627, June.
    2. Randall G. Kesselring & Jeffrey R. Pittman, 2002. "Drug Testing Laws and Employment Injuries," Journal of Labor Research, Transaction Publishers, vol. 23(2), pages 294-301, April.
    3. Joshua Hall & Peter Leeson, 2007. "Good for the Goose, Bad for the Gander: International Labor Standards and Comparative Development," Journal of Labor Research, Springer, vol. 28(4), pages 658-676, September.
    4. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
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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. 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.
    3. 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.
    4. repec:eee:reensy:v:150:y:2016:i:c:p:136-146 is not listed on IDEAS


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