Center for Business and Government, John F. Kennedy School of Government
This paper makes the case for relying on decentralized market-based incentive mechanisms to supplement performance-based regulations for promoting industrial safety. In particular, the authors examine how third party inspections coupled with insurance protection can encourage firms to reduce their risks from accidents and disasters. Their proposal is thus an example of a management-based regulatory strategy where the locus of decision-making is shifted from the regulator to firms who are now required to do their own planning as to how they will meet a set of standards or regulations.
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