The impact of occupational accidents on economic Performance: Evidence from the construction

Abstract

Occupational accidents have significant implications for a company’s human resources and productivity. However, limited understanding exists regarding the effects of high accident rates on a company’s economic results. Previous studies examining the relationship between accident rates and economic performance found mixed evidence. This paper investigates this relationship within the Spanish construction sector, which stands out among the industries with the highest accident rates. Our first hypothesis posits that the accident rate has a linear and negative effect on a company’s economic performance. Alternatively, our second hypothesis suggests that the impact is not linear and varies based on the level of accidents, with higher rates leading to a more rapid decline in profitability. We used regression analyses incorporating pooled, random, and fixed-effect estimators while controlling for endogeneity using dynamic panel data estimation. We employed the U test and the Fieller test to verify whether a nonlinear relationship exists. Contrary to our first hypothesis, our findings show that the accident rate alone does not reduce a company’s profitability across all levels of accidents. However, supporting our second hypothesis, we observe an inverted U-shaped relationship between accidents and profitability. This result suggests that there exists a level of accident rate associated with a maximum in profitability, beyond which profitability begins to decline. This study’s results have practical implications, emphasizing the need for proactive measures to address the high incidence of accidents and protect the well-being of workers.