Productivity, Safety, and Regulation in Underground Coal Mining: Evidence from Disasters and Fatalities

The U.S. regulatory state overseeing worker safety has become more complex over time. We study the underground coal mining industry, where the Mine Safety and Health Administration and related laws have established a complex structure which mines must follow. In this sector, since 2000, both productivity and accident rates have dropped substantially, while regulatory inspections and fines have increased dramatically. We seek to estimate the marginal tradeoffs between productivity and safety imposed by the regulatory state. We use the occurrence of disasters near a mine and of fatalities at a mine as shocks that increase the costs of future accidents. We find that in the second year after a disaster, productivity decreases 11% and accident rates decrease 17-83% for mines in the same state as the disaster, with some evidence that the number of managers increases. After a fatality at a mine, government inspections and penalties increase and the rates of less-severe accidents decrease 14%, with no significant effect on severe accidents or productivity. Using published “value of statistical life” (VSL) and injury cost estimates, we find that the productivity loss following a disaster in the same state as a mine costs 2.7 times the value of the safety increases, implying that the regulatory state trades off productivity for safety at a much higher rate than would a VSL-based cost-benefit approach.