Does Voluntary Regulation Provide Regulatory Relief? A Lesson from the Responsible Care Program

Abstract

We explore the relationship between voluntary and mandatory regulation to assess whether there is any evidence of regulatory relief. Specifically, we investigate whether firm participation in the Responsible Care (RC) program reduces pressure from OSHA inspections. We use two indicators of regulatory relief: (1) the overall probability of an OSHA inspection regardless of its type, and (2) the probability of a planned inspection relative to other inspection types conditional on being selected into an OSHA inspection. We apply a control function model to address the endogeneity of RC participation that is due to a potential reverse causality between participating in RC and being inspected by OSHA. Our results show that participating in RC did not lower the overall probability of an inspection, however, RC participants experienced fewer planned inspections than non-RC participants. We conclude that there is regulatory relief from OSHA inspections due to participating in RC but not enough to overwhelm the probability of an OSHA inspection due to other, unplanned triggers.