The Impact of OSHA and EPA Regulation on Productivity

This paper presents estimates of the impact of OSHA and EPA regulation on productivity. Production information for 1450 manufacturing industries from 1958 to 1980 is merged with measures of regulation, including both information on compliance expenditures by industry and enforcement efforts by OSHA and EPA. Industries that faced higher regulation during the 1970s had significantly lower productivity growth, and a greater productivity slowdown, than industries that faced lower regulation. Under certain assumptions, the regulation is estimated to have reduced average industry productivity growth by .57 percent per year, 39 percent of the average productivity slowdown. These results are robust to variations in the model and the inclusion of other productivity determinants, including poor output growth and dependence on energy. The results also suggest a one-time cost of adjustment to regulation, so the long-run impact nay be less than that estimated here. Both OSHA and EPA are found to target their enforcement effort towards those industries that are doing poorly in meeting the goals of the regulation. However, in the only area where benefits from regulation can be examined, worker injury rates and OSHA safety inspections, no significant benefits are found.