Do Rising Tides Clean the Waters? Large Facility Openings and Local Misconduct

Abstract

We examine how the opening of large facilities affects misconduct at nearby incumbent facilities operated by other firms. Using a sample of facility openings across U.S. counties, we document a significant decline in misconduct at incumbent facilities following these openings. This deterrent effect is stronger among incumbents facing higher employee turnover risk and those previously subject to limited public scrutiny. These findings suggest that intensified local labor competition and increased local visibility due to facility openings raise the expected costs of misconduct. Overall, our results highlight positive social spillovers from facility openings that extend beyond their direct economic impacts.