Working Paper: NBER ID: w26401
Authors: Kerwin Kofi Charles; Matthew S. Johnson; Melvin Stephens Jr.; Do Q. Lee
Abstract: We investigate how demand conditions affect employers' provision of safety - something about which theory is ambivalent. Positive demand shocks relax financial constraints that limit safety investment, but simultaneously raise the opportunity cost of increasing safety rather than production. We study the U.S. metals mining sector, leveraging exogenous demand shocks from short-term variation in global commodity prices. We find that positive price shocks substantially increase workplace injury rates and safety regulation non-compliance. While these results indicate the general dominance of the opportunity cost effect, shocks that only increase mines' cash-flow lower injury rates, illustrating that financial constraints also affect safety.
Keywords: workplace safety; demand shocks; mining sector; injury rates; safety regulations
JEL Codes: J23; J28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Positive price shocks (E31) | Increase in workplace injury rates (J28) |
| Positive price shocks (E31) | Increase in safety regulation non-compliance (L51) |
| Increase in workplace injury rates (J28) | Impair workplace safety (J28) |
| Increase in safety regulation non-compliance (L51) | Impair workplace safety (J28) |
| Positive price shocks (E31) | Impair workplace safety (J28) |