The economic consequences of the OSHA cotton dust standards: an analysis of stock price behavior.

Abstract

IN a celebrated 1981 decision, the Supreme Court upheld the Occupational Safety and Health Administration's (OSHA) standards limiting the exposure of textile workers to respirable cotton dust. This decision represented the culmination of a rule-making process, the beginnings of which are traceable to seminal scientific studies first released almost ten years earlier on the incidence of so-called brown lung disease. Reputed to be quite costly,1 the standards attracted more media attention as well as more Congressional, White House, and judicial involvement than almost any regulation issued in recent years. The purpose of this study is to assess the effect of major events in the development of the standards on the expected profitability of firms in the textile industry by examining the behavior of security prices at the time of those events. While little formal research exists on the ecomomic effects of the cotton dust standards beyond an analysis prepared for OSHA before the standards were issued,2 a study by Maloney and McCormick3 (M&M) offers