Principal investigator: Bruno Benevit
Original title: Regulation by Shaming: Deterrence Effects of Publicizing Violations of Workplace Safety and Health Laws
Author Matthew S. Johnson
Location of the Intervention: United States
Sample Size: 150.000 inspections
Sector: Labor Economics
Primary Variable of Interest: Compliance (Compliance)
Type of Intervention: Press release
Methodology: RDD
Summary
Internal company policies have gained increasing relevance in public opinion, reinforcing the importance of public image. In this sense, the disclosure of information about socially undesirable conduct can pressure companies to adopt compliance (compliance and confidentialityThis study analyzed how the dissemination of press releases from a government agency regarding safety and health violations affected the behavior of companies. The results revealed that the disclosure of violations at one facility led other facilities to substantially improve their compliance and experience fewer occupational injuries. The author estimated that one press release promotes the same improvement in compliance equivalent to conducting 210 inspections. The study's evidence indicated that employers improved compliance to avoid worker-related costs.
- Policy Problem
The dissemination of information related to quality plays a crucial role in business management, influencing decisions and behavior. Classifications, scores, and disclosures of aspects of a company's quality or performance have proliferated, helping to mitigate moral hazard issues by providing information that encourages companies to invest in quality. Public disclosure of quality information leads companies to improve the attributes in question, especially when inadequate or inefficient practices come under scrutiny from stakeholders.
Social networks and the media have played a significant role in this phenomenon, commonly employing strategies of "shaming"(to shame) to pressure companies to improve their behavior. By publishing lists of companies that fail in certain aspects, as did the Food and Drugs Administration (FDA) with pharmaceutical companies in 2018, seeks both “specific deterrence” of the targeted corporation and “general deterrence,” encouraging other companies to avoid being the target of future negative publicity (JOHNSON, 2020). In this way, regulatory agencies have played an important role in exposing undesirable conduct by firms and agents they regulate.
In this context, Occupational Safety and Health Administration (OSHA), the regulatory agency responsible for establishing and enforcing workplace safety and health standards in the United States, adopted a public disclosure policy in 2009. This policy began publicly exposing employers who violated workplace safety and health standards based on standardized and objective criteria according to the value of the fines imposed. Thus, this initiative provides an opportunity to identify the impacts of publicizing poor performance on the behavior of employees of non-compliant companies.
- Policy Implementation Context
Created in 1970, OSHA is the federal regulatory agency responsible for ensuring workplace health and safety conditions in the United States by establishing and enforcing standards. The agency divides the country into 10 regions, with regional offices and 90 area offices that oversee inspections and enforcement of standards. With jurisdiction over 28 states, OSHA conducts inspections to monitor compliance, citing violations and imposing financial penalties. The agency also focuses on specific programs and event-based inspections, handling a limited number of establishments due to budgetary constraints.
Since the early 2000s, OSHA's regional offices have issued press releases about inspections, as directed by the Office of Public Affairs (OPA). These releases were sent to local media and industry press, detailing the results of the inspections. The policy was intended to expose major violators to the public and highlight OSHA's enforcement activities, encouraging other companies to improve their practices to avoid negative publicity.
Although there were criteria based on fines above a certain value, the application of this rule was not rigorous, resulting in some inconsistencies in the issuance of notices. OSHA inspections varied, with some resulting in notices even below the cutoff value, depending on the nature of the violations found. In May 2009, OSHA headquarters standardized the criteria for issuing notices, resulting in a significant increase in the number of notices issued and in media coverage of OSHA violations. This standardization aimed to unify disclosure and increase the transparency of the agency's enforcement activities.
- Evaluation Details
To identify the impact of OSHA press releases, this study used the database. Integrated Management Information System (IMIS) from the regulatory agency, which contains detailed information on all inspections carried out by the entity. The main variables included the start date of the inspection, the reason (such as complaints or accidents), characteristics of the inspected site (industry, number of employees, union representation, etc.) and details of violations detected, including financial penalties applied.
The data covered inspections conducted between January 2009 and December 2013. The analysis focuses on inspections with penalties applied from October 2009 onwards, after the change in the press release disclosure policy. The sample selection excluded inspections in 22 states with OSHA state offices, in regions 2 and 3 (New York and New Jersey), and in the mining sector, which is under a different jurisdiction. Inspections outside the established limits for press releases in each region were also excluded. The sample included inspections with penalties ranging from $30.000 to $55.000, depending on the region.
The sample totaled approximately 150.000 inspections, of which only 1% exceeded the limits for press releases. The average penalty was $4.600, and most inspections found two violations, while the average rose to more than eight in the subset near the limit. Scheduled inspections accounted for 60% of the total, while complaints, referrals, and fatalities represented 34%. Inspections were concentrated in the construction and manufacturing sectors, and variables were adjusted to reduce the influence of extreme values.
- Method
The study estimated the effect of publicizing OSHA violations on the compliance of establishments (specific company facilities). The regression discontinuity (RDD) model was used to explore the discontinuity in the criteria for issuing the notices. The cutoff variable (running variableThe value of the penalties imposed was determined by the financial limit, which served as the cutoff point. The effect of Intent-to-Treat (ITT) was estimated by comparing facilities around the threshold, controlling for the penalty value and other factors. To handle imperfect adherence according to the cutoff criterion, an RDD model was considered. Fuzzy to estimate the Treatment-on-Treated (TOT) effect.
Additionally, the models considered an algorithm with a triangular kernel, giving greater weight to observations close to the cutoff point. Regarding the model polynomial, a linear polynomial was adopted on both sides of the limit, considering different slopes. To improve accuracy, control variables related to the construction sector and the type of inspection (scheduled or unscheduled) were included.
The treated and control groups were defined based on exposure to press releases, considering establishments with penalties above or below a predetermined financial threshold that defines the company's exposure in the press release. Those with penalties above the threshold were considered treated, as they were more likely to have violations publicized.
Before estimating the models, the author verified the validity of the RDD method based on the behavior of the density of the number of inspections according to the penalty, as well as the behavior of the control variables around the cutoff point. In both situations, the validity of the model was confirmed. Finally, the author also verified the existence of secondary effects. Specifically, the analysis examined how press releases impacted: (i) subsequent OSHA compliance for previously exposed establishments, and (ii) the improvement of health and safety indicators through the number of inspections triggered by fatalities in exposed companies.
- Main results
Public disclosure of environmental penalties through press releases has shown significant impacts on reducing environmental violations at facilities near those penalized. Within a 5 km radius, violations decreased by 73%, while at distances up to 50 km, the decrease was 30%. These effects were limited to the same sector as the penalized facilities, indicating that deterrence occurs within specific industrial boundaries. Furthermore, the results show considerable persistence, with effects lasting up to 36 months after the publication of the press releases. More severe penalties increased adherence to environmental standards, especially in cases with high potential for environmental risk. Thus, the strategy of publicizing the results of inspections and penalties can be considered an effective tool to encourage compliance with regulations and reduce environmental damage.
The publication of press releases also had significant effects on increasing compliance with OSHA standards, with clear impacts on reducing serious workplace accidents. The analysis revealed that these reductions were most evident in locations situated between 10 and 25 km from the penalized facility, indicating that geographical proximity plays a central role in disseminating information and motivating compliance. Furthermore, the indirect benefits were particularly pronounced in regions where companies faced higher risks of future penalties. The observed improvements in workplace safety highlight the relevance of deterrent effects in the context of occupational health. Overall, transparency in applied penalties contributed not only to compliance with standards but also to the creation of safer work environments less prone to serious accidents.
The reduction in workplace accident rates was particularly pronounced in regions with a high presence of unions, suggesting that these organizations play a crucial role in amplifying pressure for compliance. By mobilizing workers and highlighting the importance of workplace safety, unions reinforce adherence to regulations after penalties are announced. On the other hand, in areas where unionization is low or where there is less political and organizational power, the effects were less evident. This indicates that the impact of press releases also depends on institutional factors and local political capital. Furthermore, the combination of rigorous enforcement and public exposure of penalties appears to be more effective when accompanied by a social environment conducive to corporate accountability. Thus, institutional support is essential to transform information into concrete preventive actions.
- Lessons in Public Policy
In this article, the author analyzed the effects of OSHA press releases on compliance with occupational health and safety standards and on the reduction of workplace accidents. The results indicated that the public disclosure of penalties generated a significant reduction in violations of standards and in the rates of serious accidents, especially in locations near the penalized establishments. Additionally, it was found that the effects persisted over time and were more intense in regions with higher union density.
The results of this study highlight the role of transparency and public disclosure of penalties imposed by regulatory agencies in promoting regulatory compliance in companies. Evidence suggests that targeted communication strategies and the consolidation of enforcement policies that integrate public disclosure can be useful in increasing adherence to regulations, reducing accidents, and protecting worker health.
References
JOHNSON, MS Regulation by Shaming: Deterrence Effects of Publicizing Violations of Workplace Safety and Health Laws. American Economic Review, v. 110, no. 6, p. 1866–1904, 1 jun. 2020.
