Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 08-13: The impact of workplace conditions on firm performance

Sebastian Buhai (), Elena Cottini () and Niels Westergaard-Nielsen ()
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Sebastian Buhai: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark
Elena Cottini: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark
Niels Westergaard-Nielsen: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark

Abstract: This paper estimates the impact of work environment health and safety practice on …rm performance, and examines which …rm-characteristic factors are associated with good work conditions. We use Danish longitudinal register matched employer-employee data, merged with …rm business accounts and detailed cross-sectional survey data on workplace conditions. This enables us to address typical econometric problems such as omitted variables bias or endogeneity in estimating i) standard production functions augmented with work environment indicators and aggregate employee characteristics and ii) …rm mean wage regressions on the same explanatory variables. Our …ndings suggest that improvement in some of the physical dimensions of the work health and safety environment (speci…cally, "internal climate" and "repetitive and strenuous activ- ity") strongly impacts the …rm productivity, whereas "internal climate" problems are the only workplace hazards compensated for by higher mean wages.

Keywords: Occupational health and safety; Work environment; Production function estimation; Firm performance; Compensating wage differentials

JEL-codes: J28; J31; L23

40 pages, June 23, 2008

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