Organizational and Geographic Spillover Effects of Occupational Safety and Health Administration (OSHA) Enforcement: Evidence from Randomized Inspections Paper
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About the Paper
A crucial question for the Occupational Safety and Health Administration (OSHA) and other regulatory agencies in the U.S. Department of Labor (DOL) is the extent to which enforcement inspections lead to general deterrence—that is, improve compliance and performance at non-inspected workplaces. The magnitude and scope of spillovers has major implications for how OSHA should target its enforcement resources to maximize their impact on the health and safety of workers. However, identifying spillover effects of inspections entails overcoming several substantial empirical challenges. One challenge is data limitations to identify plausible sources of spillover effects. For example, inspections could lead to improved outcomes at other establishments in the same firm of an inspected establishment, but most datasets do not provide a way to identify such “corporate siblings” (establishments sharing the same corporate parent). A more fundamental challenge stems from the difficulty in disentangling spillover effects from unobserved variables that jointly affect the behavior of a focal entity and its peers (Manski 1993).
Establishments in the same firm face the same corporate culture, and establishments in the same local area face the same institutional environment (e.g. labor market), both of which might affect injury rates. Because OSHA targets many of its inspections to establishments that experienced recent injuries or complaints, such unobserved common shocks challenge the interpretation of the relationship between inspections and outcomes of peers. To overcome these challenges, in the paper the researchers estimate to what extent randomized OSHA inspections affect injury rates of non-inspected establishments. In particular, they investigate spillover effects to other establishments owned by the same firm as an inspected establishment (“corporate siblings”), and neighboring establishments regardless of corporate ownership (“neighbors”). They hypothesize spillover effects will be stronger for facilities that are closer to an inspected establishment in terms of ownership, geography and industry. Their research design utilizes the subset of inspections under OSHA’s Site-Specific Targeting (SST) program that were allocated using random assignment from 2001-2010.
To estimate spillover effects of SST inspections, the researchers compare safety outcomes of corporate siblings and neighbors of establishments randomly selected for SST inspections to those of siblings and neighbors of establishments that were eligible—but not selected—for SST inspections. They find evidence that OSHA’s SST inspections led to statistically significant and economically meaningful improvements in injury rates at corporate siblings of inspected establishments: one additional SST inspection of an establishment in a multi-unit firm on average led to a 2.2 percent decline in injuries involving days away from work per full employee (the “DAFW rate”) among the inspected establishment’s corporate siblings over the following four years. Furthermore, consistent with their hypotheses, these effects were stronger for corporate siblings in closer geographic proximity; among siblings in the same OSHA region (roughly equivalent to the 10 Census regions partitioning the country), an inspection led to a 7.7 percent decline in the DAFW rate.
The researchers point estimates suggest effects were even stronger for siblings located in the same OSHA Area Office’s boundary, but this result is not quite statistically significant. Unlike the role of geographic proximity, their results do not support the hypothesis that these within-firm spillover effects are stronger for siblings sharing the same industry. On the other hand, they are unable to detect spillover effects across firms. They test whether an SST inspection affects the DAFW rates of other establishments sharing the same a) Commuting Zone (i.e. local labor market) and 2-digit NAICS industry code (i.e. broad sector), b) Commuting Zone and 4-digit NAICS code (i.e. detailed industry), c) zip code and 2-digit NAICS code, and d) zip code and 4-digit NAICS code. In all cases, their point estimates suggest that an SST inspection led to a small decline in DAFW injury rates among other establishments in each of these four groups, but none of the results are statistically significant.
Citation
Johnson, M. S., Levine, D. I., Toffel, M. W. (2017). Organizational and Geographic Spillover Effects of Regulatory Inspections: Evidence from OSHA. DOL Scholars Final Report. Chief Evaluation Office, U.S. Department of Labor.
This study was part of the Department of Labor Scholars Program, and was produced outside of CEO’s standard research development process.