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

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  • Paul Gordon
  • Alan Woodfield

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.

Suggested Citation

  • Paul Gordon & Alan Woodfield, 2007. "Ex ante liability rules in New Zealand's health and safety in employment act: A law and economics analysis," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(1), pages 91-108.
    • Handle: RePEc:taf:nzecpp:v:41:y:2007:i:1:p:91-108
    DOI: 10.1080/00779950709558500
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    References listed on IDEAS

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    1. Paul Gordon & Alan E. Woodfield, 2006. "Incentives and the Changing Structure of Penalties in New Zealand's Health and Safety in Employment Act," Working Papers in Economics 06/03, University of Canterbury, Department of Economics and Finance.
    2. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
    3. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
    4. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
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    Cited by:

    1. Paul Gordon & Alan E. Woodfield, 2006. "Incentives and the Changing Structure of Penalties in New Zealand's Health and Safety in Employment Act," Working Papers in Economics 06/03, University of Canterbury, Department of Economics and Finance.
    2. Andrea Menclova & Alan Woodfield, 2013. "The Composition of Health and Safety in Employment Sentences in New Zealand: An Empirical Analysis," Working Papers in Economics 13/13, University of Canterbury, Department of Economics and Finance.

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    More about this item

    Keywords

    Safety precautions; ex ante liability;

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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