Demand Conditions and Worker Safety: Evidence from Price Shocks in Mining
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.
We thank Kurt Lavetti and Ryan McDevitt for helpful comments, and seminar participants at the 2018 ASSA meetings and UT Austin. Thanks also to Vanessa Stewart and Reza Noorani at MSHA for guidance on using the MSHA databases, and to Jeff Kohler, Linda McWilliams, and George Luxbacher for helpful details about the mining sector. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.