Academic journal article Journal of Risk and Insurance

Simulating Workplace Safety Policy

Academic journal article Journal of Risk and Insurance

Simulating Workplace Safety Policy

Article excerpt

Simulating Workplace Safety Policy, by Thomas J. Kniesner and John D. Leeth (Kluwer Academic Publishers, 1995).

Imagine a workplace with no OSHA standards, a 100 percent experience-rated workers' compensation insurance premium, and a workers' compensation system that places emphasis on finding fault in workplace accidents. These are some of the recommendations that come from Simulating Workplace Safety Policy.

Workplace safety policy has been significantly influenced by workers' compensation (WC) laws in each state and by the Occupational Safety and Health Administration (OSHA) at the federal level. A large volume of literature attempts to understand the impact these two programs have on safety in the workplace. Frustrated by the constraints and limitations of traditional econometric analysis to effectively evaluate this impact, Kniesner and Leeth develop and apply an analytic technique called numerical simulation to the question of workplace safety policy. As stated in the introduction, numerical simulation is used "to discover any subtle complementarities between the safety effects of OSHA and WC, to distinguish among the various incentives that WC offers to reduce injuries at work and to discover possible cost effective reforms to OSHA and WC as they currently exist in the United States."

Methodically, the authors demonstrate traditional econometric analysis applied to worker risk and injury potential and show why a movement to numerical simulation is appropriate. By reviewing the historical evolution of both workers' compensation and the Occupational Safety and Health Administration, relevant variables are identified and analyzed. These variables include those related to the insurance, labor, and product markets, such as prices, wages, and probability of injury. In this way, the interactions of safety policy are studied. The cost effectiveness of both WC and OSHA is evaluated and the findings are discussed. Refinement in current programs is the ultimate goal. …

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