@article{Bovay:307948,
      recid = {307948},
      author = {Bovay, John},
      title = {Moral hazard under discrete information disclosure:  Evidence from food-safety inspections},
      address = {2021-01},
      number = {2388-2020-1461},
      pages = {45},
      year = {2021},
      abstract = {This paper provides evidence on the responses of producers  to mandatory disclosure of discrete quality ratings, a type  of policy sometimes referred to as “naming and shaming”.  The context is a series of four regulatory changes  undertaken by the U.S. Department of Agriculture (USDA)  over 2006–2015, regarding disclosure of information about  the results of tests for Salmonella in chicken carcasses at  slaughter establishments. If establishments exceed certain  rates of positive samples, they are designated “Category 2”  or “Category 3”. Under some policy regimes, Category 2 and  3 establishments have been listed on a public USDA website.  I employ carcass-level data on Salmonella test results over  1999–2018 for all federally inspected establishments to  explore the effects of public disclosure and other policy  changes on Salmonella test outcomes. First, using a  regression discontinuity approach, I demonstrate that: (1)  When establishments fail to meet categorization thresholds  but these failures do not subject them to public  disclosure, Salmonella test performance worsens. (2) When  establishments fail to meet thresholds and are therefore  subjected to public disclosure, there is no statistically  significant change in Salmonella test performance. (3)  Under one policy regime, establishment operators relaxed  efforts after sustained good Salmonella test performance  ensured they would avoid public disclosure. Second, I  document that when establishments have more leeway with  respect to the thresholds, their performance on Salmonella  tests worsens. Third, I use a regression discontinuity in  time approach to demonstrate the effects of the series of  policy changes on average Salmonella test results. I show  that the introduction of public disclosure in 2008 reduced  the average rate of positive Salmonella samples by about 55  percent. On the other hand, a tightening of standards in  2011 had a bifurcating effect wherein establishments that  performed poorly (prior to the policy change) tended to  perform even worse and middling establishments tended to  improve. There was no statistically significant effect on  the best-performing establishments. The net effect of the  tightening of standards in 2011 was to more than double  average Salmonella rates. My results provide evidence that  the public disclosure of discrete information about  Salmonella in chicken carcasses results in producers  exerting extra effort to avoid disclosure, and less effort  when disclosure status is already certain.},
      url = {http://ageconsearch.umn.edu/record/307948},
      doi = {https://doi.org/10.22004/ag.econ.307948},
}