Does Industry Self-Regulation Reduce Accidents? Responsible Care in the Chemical Sector

Abstract:     
This is the first study to evaluate the impact of self-regulation on industrial accidents. We examine Responsible Care in the US chemical manufacturing sector using our author- constructed database of 1,867 firms that own 2,963 plants between 1988 and 2001. Firms’ self- selection into RC is instrumented using pollution-related regulatory pressure on firms that influences their probability of joining RC, but not plant-level accidents. The average treatment effect on the treated indicates that RC reduces the likelihood of accidents by 2.99 accidents per 100 plants in a given year. This 69.3% reduction in the likelihood of accidents, accounting for the plants that participate in RC, translates to back-of-the-envelope avoided losses of $0.8 billion to $3.8 billion per year. RC also reduces the likelihood of more narrowly-defined accidents, i.e., process safety accidents and accidents related to violations of RC codes, by 5.75 accidents per 100 plants in a given year or by 85.9%.

Number of Pages in PDF File: 60

Keywords: Corporate Social Responsibility, Industry Self-Regulation, Industrial Accidents, Process Safety, Environmental and Health Safety

JEL Classification: Q53, Q58, L51, L65, D21

working papers series