Matthew S. Johnson
Durham, NC 27708
Institutional Affiliation: Duke University
NBER Working Papers and Publications
|October 2019||Demand Conditions and Worker Safety: Evidence from Price Shocks in Mining|
with Kerwin Kofi Charles, Melvin Stephens Jr., Do Q. Lee: w26401
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.