At Bloomberg Businessweek, Christina Larson examines a previously featured study which found a strong correlation between executives’ political connections and higher death rates among employees.
Coal mining in China is widely considered one of the world’s deadliest jobs. Government statistics record that in the first nine and a half months of last year, 1,146 Chinese coal miners died in work-related accidents, about four deaths per day—and most analysts assume official numbers represent significant underreporting. […]
Still, not all Chinese coal mines are equally dangerous. Following the Xiangshui tragedy, Guizhou’s Deputy Governor Sun Guoqiang told local reporters, with surprising candor, that state-run mines are more deadly than private mines—because state-run firms can rely on connections and official favors to evade safety regulations. He called the situation “grave.”
[…] The robustness of the link [Fisman and Wang] found was striking: Connected Chinese companies averaged five times as many fatalities as similar unconnected companies. What’s more, the arrival or departure of a highly connected executive was marked by, on average, the death rate per 10,000 workers rising by 10 or falling by 6.4, respectively, in the following year. In a research summary published in the January/February 2013 issue of Harvard Business Review, they dubbed it “the unsafe side of Chinese crony capitalism.” “A fivefold difference I personally find to be stunning,” says Fisman. “I would have expected maybe a 10 percent bump, not 500 percent—this is a case where the fact of a connection is not as surprising as the magnitude of it.”