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What a Difference a Grade Makes: Evidence from New York City's Restaurant Grading Policy
Author(s) -
Rothbart Michah W.,
Schwartz Amy Ellen,
Calabrese Thad D.,
Papper Zachary,
Mijanovich Todor,
Meltzer Rachel,
Silver Diana
Publication year - 2019
Publication title -
public administration review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.721
H-Index - 139
eISSN - 1540-6210
pISSN - 0033-3352
DOI - 10.1111/puar.13091
Subject(s) - revenue , grading (engineering) , compliance (psychology) , closure (psychology) , panel data , business , public economics , public policy , marketing , economics , accounting , psychology , econometrics , economic growth , engineering , market economy , social psychology , civil engineering
Can governments use grades to induce businesses to improve their compliance with regulations? Does public disclosure of compliance with food safety regulations matter for restaurants? Ultimately, this depends on whether grades matter for the bottom line. Based on 28 months of data on more than 15,000 restaurants in New York City, this article explores the impact of public restaurant grades on economic activity and public resources using rigorous panel data methods, including fixed‐effects models with controls for underlying food safety compliance. Results show that A grades reduce the probability of restaurant closure and increase revenues while increasing sales taxes remitted and decreasing fines relative to B grades. Conversely, C grades increase the probability of restaurant closure and decrease revenues while decreasing sales taxes remitted relative to B grades. These findings suggest that policy makers can incorporate public information into regulations to more strongly incentivize compliance .