Catherine Hausman, "Corporate Incentives and Nuclear Safety " (Revised April 2013) (Revised version published in American Economic Journal: Economic Policy, 6(3): 178 - 206. August 2014) Full Paper
Beginning in the late 1990s, approximately half of all commercial U.S. nuclear power reactors were sold by price-regulated public utilities to independent power producers. At the time of the ownership transfers, some policy makers raised concerns that these profit-maximizing corporations would ignore safety. Others claimed that corporations would improve reactor management, with positive effects on safety. This paper provides the first comprehensive evidence of the effect of these ownership transfers on plant safety. Using data on a variety of safety measures and a difference-in-difference estimation strategy, I find no evidence that safety deteriorated; for some measures, it even improved following divestiture. Moreover, for given levels of generation, safety substantially improved. Ownership transfers led to increased operating efficiency, and these gains do not appear to have come at the cost of public safety. To provide intuition for these findings, I show how these results are consistent with the incentives faced by nuclear plant operators.