The role of location and contracts in firm governance and labor: an examination of the US coal industry

Abstract

This dissertation explores empirically how external factors can influence the organizational structure of firms and how the structure a firm chooses can affect worker outcomes.

The first chapter examines how a policy reform affected the organizational choices of firms. The MINER Act of 2006 resulted in increased scrutiny and penalties for underground coal mining operations relative to surface operations. In turn, this changed the incentives for coal preparation facilities to own these mines. Particularly, markets most affected by the reform saw an increase in ownership along an extensive margin and markets already integrated saw a decrease along an intensive margin. I argue these results reflect the competing incentives created by the policy. The increased riskiness of shut downs and flows in production resulted in preparation plants integrating with at least one mine to assure a basic level of supply. The increased regulatory liability of ownership induced by the new regulatory structure resulted in a countervailing force, reducing the intensity of integration in markets that were integrated prior to the reform.

The second chapter (with David Weil) studies the prevalence of contractor utilization in the mining industry. Outsourcing of tasks has increased significantly in the underground coal mining industry over the last two decades. We hypothesize that the market and organizational incentives facing contractors increase the likelihood of injuries and fatalities to their workforce. Our results suggest increased risk exposure for mines with high contractor utilization. These findings have important implications for enforcement and public policies and extend the evidence of the adverse impact of forms of subcontracting on health and safety to the mining sector.

Finally, the third chapter provides a case study of two major actors in the industry, Alpha Natural Resources and Massey Energy Company. It looks at the ownership choices the two companies have made in the past decade. Looking at these different decisions allows for the identification of contract operations that are of concern from a regulatory standpoint in this industry. This paper provides a blueprint for future research in determining the prevalence of these particular contracting arrangements in US coal mining.