Predation through Regulation: The Wage and Profit Impacts of OSHA and EPA

This paper documents the importance of studying the indirect effects of OSHA and EPA regulations -- the competitive advantages which arise from the asymmetrical distributions of regulatory impact among different types of firms. We argue that if the competitive advantage gained through indirect effects is sufficiently large, it can more than offset any direct costs producing a net benefit for the regulated firm and its workers. The indirect effects of OSHA and EPA regulations arise in two ways. The first source is compliance asymmetries, whereby one firm suffers a greater cost burden even when regulations are evenly enforced across firms. The second source is enforcement asymmetry, whereby regulations are more vigorously enforced against certain firms. Earlier research shows that these asymmetries do exist and are based on firm size, unionization, and regional location. In this paper we empirically document that the indirect effects produced by these asymmetries mitigate the direct costs of regulations for manyfirms. Large, unionized firms in the Frostbelt are clearly gaining wealth at the expense of small, nonunionized firms in the Sunbelt.