Human Bias in the Oversight of Firms: Evidence from Workplace Safety Violations

Abstract

We study the effects of mood as a source of human bias on regulators’ oversight and enforcement decisions. We use weather at facilities at the time of an OSHA inspection to proxy for the OSHA compliance officers’ mood. We find that during periods of good mood due to sunny weather, the number of workplace safety violations and dollar penalties assessed by the officer decrease. These effects are more pronounced when OSHA officers have more discretion. In turn, the effect of mood on oversight and enforcement decisions can be mitigated by increased monitoring by the regional OSHA office. Furthermore, our results suggest that there is a slightly higher incidence of workplace accidents after “good mood” inspections. Overall, our findings show that regulators’ mood results in bias in the oversight of firms.