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PRODUCT SAFETY IN A REGULATED INDUSTRY: EVIDENCE FROM THE RAILROADS
Author(s) -
GOLBE DEVRA L.
Publication year - 1983
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1983.tb00615.x
Subject(s) - mile , profitability index , incentive , product (mathematics) , economics , sign (mathematics) , business , industrial organization , finance , microeconomics , geometry , mathematics , mathematical analysis , physics , astronomy
It is sometimes argued that a relaxation of price controls in a regulated industry would lead to a decrease in profits and hence to an incentive for firms to skimp on safety. Theory does not allow us to sign the relationship between prices and safety a priori. Analysis of data from the railroad industry from 1963–67 indicates 1) profitable railroads have fewer accidents per mile than do unprofitable roads; 2) for profitable roads, if there is any relationship at all between accidents and profitability it is positive: more profitable roads have more accidents (per mile); and 3) for unprofitable roads, accident rates rise as losses rise.