The Economic Consequences of the OSHA Cotton Dust Standards: An Analysis of Stock Price Behavior

The US Occupational Safety and Health Administration (OSHA) standards limiting the exposure of textile workers to respirable cotton dust were upheld by the US Supreme Court in 1981. To assess the effect of major events in the development of standards on the expected profitability of firms in the textile industry, the behavior of security prices at the time of the events is examined. Results suggest that, individually, these events did not affect investor expectations enough to be significantly related to changes in the share prices of textile firms. However, when taken as a composite, results suggest that investors expected the industry to be adversely affected or unaffected. In contrast with Maloney and McCormick's results (1982), no advantage was seen for larger cotton firms. The market apparently expected the net effect standards to be somewhere between an insignificant loss and OSHA's original estimate. The best estimate is that the market value of cotton firms fell approximately 23%.