Demand Conditions and Worker Safety: Evidence from Price Shocks in Mining

62 Pages Posted: 30 Oct 2019 Last revised: 22 Aug 2021

See all articles by Kerwin Kofi Charles

Kerwin Kofi Charles

Yale School of Management

Matthew S. Johnson

Duke University - Sanford School of Public Policy

Melvin Stephens

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Do Q Lee

New York University

Date Written: October 2019

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.

Suggested Citation

Charles, Kerwin Kofi and Johnson, Matthew and Stephens, Melvin and Lee, Do Q, Demand Conditions and Worker Safety: Evidence from Price Shocks in Mining (October 2019). NBER Working Paper No. w26401, Available at SSRN: https://ssrn.com/abstract=3476481

Kerwin Kofi Charles (Contact Author)

Yale School of Management ( email )

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P.O. Box 208200
New Haven, CT 06520-8200
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Matthew Johnson

Duke University - Sanford School of Public Policy ( email )

201 Science Drive
Box 90312
Durham, NC 27708-0239
United States

Melvin Stephens

University of Michigan at Ann Arbor - Department of Economics ( email )

Ann Arbor, MI
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Do Q Lee

New York University ( email )

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New York, NY New York 10012
United States
(312) 428-0188 (Phone)

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