Ex ante liability rules in New Zealand's health and safety in employment act: A law and economics analysis

Abstract

New Zealand's health and safety legislation imposes penalties for breaches of duty even where accidents have not occurred. We argue that ex post liability as implemented provides inadequate incentives for safety precautions due to weak penalties and significant uncertainty surrounding courts’ required standard of care. Merely adding ex ante liability with even weaker penalties and low inspection probabilities is unlikely to fully compensate for these deficiencies, but may be a worthwhile complement. More strict ex ante standards than socially optimal precaution levels may even be desirable, providing some justification for observed relatively stringent safety regulations and required standards of precaution.