Monitoring health in Sweden: on the rationale for working environment regulations

The quality of the working environment affects the health status of a population. In the absence of government intervention this quality would be determined by market forces, but the market outcome is generally not accepted. Instead public policy attempts to carefully monitor the level of occupational hazards, which are invariably subject to regulation in industrialized countries. However, this study demonstrates that the welfare implications of this monitoring of health are not self-evident. In the presence of a tax on labour and, for example, a tax-financed social insurance system, it is shown that market forces may lead either to excessive or to sub-optimal investments in injury prevention. Both private and (local) public safety goods are considered.