The winding road to industrial safety. Evidence on the effects of environmental liability on accident prevention in Germany

Onno Hoffmeister and Reimund Schwarze

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: The German Environmental Liability Law (ELL) of 1991 has introduced far-reaching civil liability for environmental damages with the aim to increase firms' efforts to prevent accidents. Previous studies find poor evidence that this goal has actually been achieved. One and a half decades after the introduction of that law, we undertake a new attempt to investigate the impact of the ELL on accident prevention. Our analysis is based on annual data on the number of environmental accidents per year, reported to the monitoring agency ZEMA, and the risk premium imposed by a large German insurer on environmental liability insurance (ELI). As reliable accident reporting has begun only after the implementation of the new law into practice, pre- and post-reform levels of accident prevention cannot be directly compared. However, the time series of ELI premiums cuts across these two periods. Once we examine the relationship between the ELI premium and accident prevention and observe the effect of the reform impulse on the former, we are able to model the dynamics of the adjustment process induced by the ELL. According to our results, the average number of environmental accidents per year has decreased from 29 before to 17 and a half after the reform. Our dynamic analysis reveals an overshooting of the insurance premiums in the first years after the reform and a successive decrease from 1997 onwards. The premiums and firms' prevention efforts achieved a new equilibrium in 2000.

Keywords: Environmental liability; accident prevention; empirical analysis; Germany (search for similar items in EconPapers)
JEL-codes: K13 K32 Q58 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-06
New Economics Papers: this item is included in nep-eec, nep-env and nep-law
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https://www2.uibk.ac.at/downloads/c4041030/wpaper/2007-11.pdf (application/pdf)

Related works:
Journal Article: The Winding Road to Industrial Safety: Evidence on the Effects of Environmental Liability on Accident Prevention in Germany (2010)
Journal Article: The Winding Road to Industrial Safety: Evidence on the Effects of Environmental Liability on Accident Prevention in Germany (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2007-11

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