Fuzzy Frontiers of Production: Evidence of Persistent Inefficiency in Safety Expenditures
NBER Working Paper No. 1366
This study documents a strong inverse relationship between accident rates and production in a sample of eleven firms in the same narrowly defined industry classification. Given the detailed set of input controls and controls for plant-specific and time-specific factors used in the analysis, the study argues that a theoretical framework that describes firms as operating on well-defined production frontiers is not adequate for providing an entirely accurate interpretation of the basic empirical finding.Three elaborations to the basic production frontier framework are developed and used to interpret the accident-productivity relationship.