Economic Consequences of OSHA Cotton Dust Regulation: An Income Efficiency Model Approach

Abstract

This paper used Data Envelopment Analysis (DEA) to test the economic consequences of the Occupational Health and Safety Administration (OSHA) cotton dust standards by comparing the relative efficiency of firms affected by cotton dust in SIC 2200 and 2300 for the years before and after the Supreme Court upheld the regulation in 1981. Accounting-based inputs of common equity, total assets and production costs were minimized, while total revenue was maximized. Using available Compustat firms, and controlling for the effects of imports for consumption providing for asymmetric cost disadvantages to United States firms, we found that the surviving firms had become more efficient during the postregulatory period as predicted. Apparently, these firms were able to accommodate the dust standard, reduce costs and improve the operating efficiency of tnese firms simultaneously. The results also indicate the usefulness of DEA as an alternative method of testing the economic consequences of a regulation.