sketchy. Recalling the first of our opening quotations, the direct effects of regulation are
the partial equilibrium effects of workplace safety laws on individual firms and persons.
The indirect effects stem from compliance asymmetries and enforcement asymmetries;
the former stem from economies of scale (smaller firms experience a larger unit-cost
effect) and plant age, while the latter reflect regulations that are “systematically skewed”
against particular groups of firms/workers. In each case, the authors have strong priors.
They contend that there are strong economies of scale for compliance with OSHA
regulations, and also that plants located in northern and midwestern states by virtue of
their age would have higher compliance costs were the regulations are evenly enforced
(their own research pointing to regional enforcement asymmetries favoring these Frost-
Belt firms, as well as more intensive enforcement against small and nonunion firms).
Bartel and Thomas (1987) evaluate the effects of regulation on total industry rents,
namely, workers’ wages and the price cost margin. The authors approximate the
compliance costs of OSHA by the dollar value of penalties assessed for violations of
safety standards (some 90 percent of the total) in 22 states, 1974-78.4 For the wage
equation, these compliance costs are divided by the number of workers, for the price-cost
margin they are divided by the value of shipments. The other key independent variables
are plant size (percentage of workers in plants with 250 or more employees), the
percentage of industry employment that is in the Frost Belt, and the percentage of
workers in the industry covered by a collective bargaining agreement. Each is interacted
with the regulation variable(s). For the wage equation, the controls include several
characteristics of the workforce, average establishment size, overtime hours, research and
development expenditures and advertising expenditure per employee, the four-firm
concentration ratio, the annual growth in shipments, and year dummies. The union
variable is interacted with the regulation argument and with the two intangible capital
measures to detect evidence of differential rent seeking. The price-cost margin equation
additionally includes various proxies for expenses, the value of assets again in relation to
sales, and the annual growth in materials cost. Here the large firm and Frost-Belt
variables are interacted with the regulation variable (and unionism).