This paper adopts the accident incidence, the gross industry output value, the investment in safety facilities, and per capita wage of employment as the indexes to empirically analyze the investment performance of chemical safety facilities using time series data by VECM in China. The empirical results indicate that for China’s chemical industry, increasing investment fails to improve the short-term safety level significantly because of the offsetting behavior of workers. Over the long term, the offsetting behavior tends to disappear, and the chemical accident incidence can be decreased through increasing investment. Poor safety awareness among workers is one of the causes of accident incidences. The conclusions provide theoretical support for China to perfect chemical industry safety management.
With the birth of chemical industry, controversy arose because of the industry’s high risk to human safety and to the environment. In recent decades, hazardous chemical accidents have become a worldwide problem. Many international conventions relating to the chemical industry have been legislated, including regulations, policies, and industry management systems, such as the Rotterdam Convention (1998), the Stockholm Convention (2001), the UNEP (United Nations Environment Programme) Strategic Approach to International Chemicals Management (1998), and the EU (European Union) directive on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH, 2007). Over the past 20 years, China has become a major international player in the chemical industry. Because of the rapid development of China’s chemical industry, it has become the pillar industry of the national economy. Consequently, hazardous chemical accidents happen frequently, often engendering secondary disasters. Secondary disasters also pose big threats to human safety and health. The safety, health, and environmental problems caused by hazardous chemical accidents are increasing. The high frequency of chemical accidents has caused serious social problems in China . China has recently enacted more than 200 laws, administrative regulations, and departmental rules for its chemical industry. This intensification of management is unprecedented, but it still cannot stop the rise of chemical accidents year by year [
Most scholars used econometric analysis methods to research how the laws and regulations strengthened by safety regulatory organization influence the number of safety accidents brought by production and safety regulation effects empirically. Smith (1979) suggested that OSHA (Occupational Safety and Health Administration) policies were effective after analyzing the impact of its inspection on manufacturing injury rates over the period of 1973-1974 [
In this paper, an empirical test on the investment performance of chemical safety facilities will be implemented to talk about the cause of the chemical accidents happening frequently through analyzing the dynamic relationship between the investment and the performance of chemical safety facilities, using the time series data by VECM (Vector Error Correction Model).
The general empirical analysis approach for regulation effect is to do a regression of the regulation behavior index to the regulation effect index, then test the significance and direction of the influence. Due to the particularity and complexity of the chemical industry, there are many factors that influence the chemical accident incidence. In this paper, index selection is mainly on the basis of existing literature. For instance, safety inspections and fines of factories had been selected as regulation behavior; workplace accident mortality had been selected as regulation effect by Klick and Stratmann (2003) in their research using the data provided by the OSHA [
This paper uses the annual data3 over the period 1981-2011 to identify the development trend of China’s chemical accidents. Chemical industry refers to the Manufacture of Raw Chemical Materials and Chemical Products according to national economy classifications in China . The number of chemical accidents (1981-2000) is drawn from the book Selected Cases of Major Chemical Accidents, and the number of chemical accidents (2001-2011) is from the AIS (Accident Inquiry System) of the SAWS (State Administration of Work Safety) in China. The data of chemical gross industry output value and investment in fixed assets are calculated from the China Statistical Yearbook (1982-2012). The data about per capita wage is calculated from the China Labor Statistical Yearbook (1991-2012). In order to eliminate price change effects on chemical gross industry output value and investment in fixed assets, we transform the data of chemical gross industry output value and investment in fixed assets to constant price of 1978 by the GDP deflator. To eliminate heteroscedasticity, except for accident incidence, all of the other variables take the form of natural logarithms. These four variables are respectively expressed by
We begin our empirical analysis by testing for unit roots in the accident incidence
In
In order to examine the long-term relationship among the accident incidence
As illustrated in
Variable | ||||||||
---|---|---|---|---|---|---|---|---|
t-statistic | −0.9979 | −5.3515 | −1.0925 | −5.3710 | −1.7326 | −2.3890 | 13.0112 | −4.3308 |
[LL] | [ | [ | [ | [ | [ | [ | [ | [ |
CV | −1.9525 | −1.9529 | −3.5684 | −3.5742 | −3.5742 | −1.9529 | −1.9525 | −3.5742 |
Notes: LL denotes lag length, which is selected using the SIC automatically and CV denotes critical values at the 5% significant level.
Hypothesized No. of CE(s) | Eigenvalue | Trace Statistic | 0.05 Critical Value | |
---|---|---|---|---|
None* | 0.9323 | 146.8033 | 47.8561 | 0.0000 |
At most 1* | 0.7701 | 74.1057 | 29.7971 | 0.0000 |
At most 2* | 0.7140 | 34.4119 | 15.4947 | 0.0000 |
At most 3 | 0.0224 | 0.6104 | 3.8415 | 0.4346 |
From Equation (1), in the long term, an increase in the gross output value
A causality test is often used to analyze the causal relationship among the variables. When there is cointegration relationship among the variables, we can construct a VECM to get the regression equation including the error correction item. The Wald joint test is then used to test the significance of the coefficient both on the variables and the error correction item to judge the causality direction [
where
of explaining variables to short-term change of explained variable.
The specific VECM equation4 in which accident incidence
where
At the 5% significant level, use the Wald joint test on the equation in which accident incidence
The statistical significances of each coefficient in
Through impulse response function analysis, the path of influence affected by gross industry output value
Test equation5: | ||||||
---|---|---|---|---|---|---|
Joint test | ||||||
14.8771 | 8.3034 | 20.0818 | 42.7323 | 4.03778 | ||
0.0019 | 0.0401 | 0.0002 | 0.0000 | 0.0445 |
NOTE:
safety facilities
From the perspective of the chemical workers’ safety awareness, workers tend to generate offsetting behavior, because of workers’ behavior in regards to moral hazard. The workers’ offsetting behavior is derived from the relatively low knowledge level of chemical workers. The main reason for chemical workers lack knowledge culture is that according to China’s family planning policy, each urban family only has one child, and each rural family can have two children. The consequences of the one-child policy are as follows: first, the urban only- child is spoiled and doesn’t want to work at the chemical factory in which the working environment is poor; second, the vocational-technical schools in cities designed for chemical plant workers have been forced to close due to lack of students; third, in China, migrant workers6 have become the current primary labor in high-risk industries such as the chemical industry, especially in private chemical enterprises. Because of migrant workers' education level is relatively low, when judging safety risk, they are more likely to generate offsetting behavior. In the short term, when the enterprises increase investment in safety facilities to provide a safer working environment for workers, the workers will be dependent on enterprise safety precautions excessively, thinking that their working environment is safe, thus reducing their safety awareness7. So, workers tend to increase labor efforts to earn higher wages by reducing safety efforts (assume that the worker will allocate his effort between wage effort and safety effort in this paper), leading to an offsetting effect. If the offsetting effect is strong enough, the accident incidence will increase conversely. Therefore, in the short term, with the increase in investment in safety facilities, per capita wage and accident incidence both increase. In the long term, with the improvement of the workers’ risk prevention awareness level through strengthening education and training, when increasing investment in safety facilities, workers will be aware of the increase in potential risk, rather than believing that their working environment gets better. Thus, workers will transfer their effort to safety from wages, obtaining a higher safety level. That is, with the workers’ offsetting behavior disappearing gradually, an increase in investment in safety facilities will eventually have the effect off reducing accident incidence.
Dalian is located in the northeast coastal chemical industry area of China, and the chemical industry is developing rapidly. After the oil pipeline explosion on July 16, 2010 which shocked the world, the nation and the local government attached great importance to chemical safety. In 2010 and 2011, the government passed a total of 6 laws and regulations about hazardous chemicals (30, 32, 36, 40, 41, 42 in order), two times more than the sum of the past five years. Meanwhile, the Dalian government invested 20 million Yuan (investment in safety facilities) to improve the safety level of chemical companies, including the upgrade and reform of enterprise hazardous process automation control, with all the chemical enterprises within the district achieving the process automation control. This 20 million Yuan investment not only achieved the expected effect, but also increased the accident incidence.
On November 25, 2010, a toxic gases spill accident (including carbon oxide, hydrogen sulfide and so on) occurred in Carbon Chemical Co., Ltd. in Dalian, resulting in more than 20 workers, who were doing gymnastics close to the scene, suffering from toxic gas poisoning. The enterprise has sound safety rules and regulations, perfect safety operational procedures and security facilities. The cause of the accident was ash deposits in the gasifier, leading to the stopping of the compressor, and then the system stopped automatically. When the gases in the furnace burned insufficiently, toxic gases emitted directly through the torch. The direct cause of the accident was the workers’ over-reliance on the automatic safety chain system. When deviant behavior occurred at the end of the safety chain, there was no human intervention, eventually leading to the gas leakage accident8.
On August 29, 2011, Dalian Petrochemical Company’s refined oil storage tank exploded and caught fire. The incident occurred when the tubing outlet velocity of #875 tank reached 4.34 m/s, due to the floating plate without automatic floating, during the oil delivery operations of refined oil storage tanks. Due to exceeded safety limits, a large amount of static electricity was produced and discharged, igniting the mixture of oil mist, combustible gas and air, which exploded. This was a typical accident caused by violation of rules. When the tubing outlet velocity exceeded the safety limits, the workers didn’t control the tubing outlet velocity within safe limits in accordance with the rules, but relied on automatic equipment operation fully, resulting in the storage tank exploding and catching fire.
During the 2010 and 2011, while safety regulation was enhanced, the number9 of the chemical accidents was 2.7 times more than the total of the previous two years in Dalian. And 62.5% of 2010-2011 accidents belong to the “three violations” category. This indicates that the offsetting behavior is more serious in Dalian. Regulation enhancement did not reduce the accident incidence, but increased the accident incidence, due to workers relying too heavily on security facilities. The main reason is that, several years ago, the original chemical vocational- technical school in Dalian had been forced to close due to insufficient number of students. Migrant workers’ safety training is insufficient and safety awareness is weak, which is the reason for serious chemical workers’ offsetting behavior in Dalian. The case of Dalian further illustrates workers’ offsetting behavior is the main cause of chemical accident increases.
This paper adopts the chemical accident incidence, the chemical gross industry output value, investment in safety facilities of chemical industry, and per capita wage of chemical industry employment as the indexes to empirically analyze investment performance of chemical safety facilities using time series data over the period 1981-2011 by VECM. The empirical results indicate that for China ’s chemical industry, in the short term, increasing fails to improve the safety level significantly because of the offsetting behavior of the employees. Over the long term, the offsetting behavior tends to diminish, and the chemical accident incidence can be decreased by increasing the investment performance index. Poor safety awareness among workers is one of the causes of accident incidences. Therefore, making sure to heighten the chemical workers’ safety awareness is one of the measures to improve the investment performance of chemical safety facilities in the short term.
Social Science Fund Project of Liaoning province (L13BJY033); Social Science Fund Project co-sponsored by province and ministry (13JJD790042).