An economic analysis of factor usage and workplace regulation

Extract: In this paper the statistical results show generally that the level of WC [Workers Compensation] costs does alter factor choices. It was hypothesized and results are obtained which indicate that higher benefit levels increase the substitutability of capital for labor. It does not appear, though, that WC costs alter other factor relationships, as the other estimates tend to bear out. It does seem clear, however, that the primary implication of the theory developed--that safety regulation has costs in terms of output reduction and lower factor usage--is confirmed by the findings of the empirical work. And, if one adds the findings of other researchers, the implications are rather damaging to these forms of regulation