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What are the Financial Implications of Public Quality Disclosure? Evidence from New York City’s Restaurant Food Safety Grading Policy

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Abstract

Grading schemes are an increasingly common method of quality disclosure for public services. Restaurant grading makes information about food safety practices more readily available and may reduce the prevalence of foodborne illnesses. However, it may also have meaningful financial repercussions. Using fine-grained administrative data that tracks food safety compliance and sales activity for the universe of graded restaurants in New York City and its bordering counties, we assess the aggregate financial effects from restaurant grading. Results indicate that the grading policy, after an initial period of adjustment, improves restaurants’ food safety compliance and reduces fines. While the average effect on revenues for graded restaurants across the municipality is null, the graded restaurants located geographically closer to an ungraded regime experience slower growth in revenues. There is also evidence of revenue convergence across graded and ungraded restaurants in the long-term.

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  • Michah W. Rothbart & Amy Ellen Schwartz & Rachel Meltzer & Thad Calabrese & Tod Mijanovich & Meryle Weinstein, 2017. "What are the Financial Implications of Public Quality Disclosure? Evidence from New York City’s Restaurant Food Safety Grading Policy," Center for Policy Research Working Papers 202, Center for Policy Research, Maxwell School, Syracuse University.
    • Handle: RePEc:max:cprwps:202
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    References listed on IDEAS

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    1. David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 935-963, December.
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    More about this item

    Keywords

    Public Grades; Restaurant Revenues; Public Resources;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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