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

Michah W. Rothbart (), Amy Schwartz, Rachel Meltzer, Thad Calabrese, Tod Mijanovich and Meryle Weinstein
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Michah W. Rothbart: Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244, https://www.maxwell.syr.edu/research/center-for-policy-research
Rachel Meltzer: Milano School, The New School
Thad Calabrese: Wagner School, New York University
Tod Mijanovich: Wagner School, New York University
Meryle Weinstein: Institute for Education and Social Policy, Steinhardt School, New York University

No 202, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

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.

Keywords: Public Grades; Restaurant Revenues; Public Resources (search for similar items in EconPapers)
JEL-codes: D12 H22 H27 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2017-04
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:202

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