“Productivity, Safety, and Regulation in Underground Coal Mining: Evidence from Disasters and Fatalities” by Gautam Gowrisankaran
Economics Seminar
Author:
Gautam Gowrisankaran
University of ArizonaJefferey L. Burgess
University of ArizonaEric A. Lutz
University of ArizonaCharles He
Underground coal mining is a dangerous occupation where firms may face tradeoffs between productivity and safety. We use occurrences of disasters near a mine and fatalities at a mine as shocks that increase the costs of future accidents. We find that in the second year after a disaster in the same state as a mine, productivity decreases 11% and accident rates decrease 17-83%, with some evidence that the number of managers increases. After a fatality at a mine, government inspections and penalties increase and less-severe accident rates decrease by 14%, with no significant effect on severe accidents or productivity. Using published "value of statistical life" and injury cost estimates, the productivity decrease following a disaster in the same state as a mine costs 2.7 or more times the value of the safety increases.
