The Direct and Indirect Effect of Safety Regulation on Service Quality: a Cautionary Tale from the French "Robien Law"

The Direct and Indirect Effect of Safety Regulation on Service Quality: a Cautionary Tale from the French « Robien Law »
Lisa Chever et Michael Klien (Chaire EPPP)
Abstract: To deal with elevators accidents the French ’Robien law’ mandated a modernization of ’old’ elevators until 2008. Although available statistics suggest that the law led to a reduction of mortal accidents, a seemingly paradoxical side effect occurred: the modernization coincides with an unprecedented deterioration in service quality, doubling the average elevator downtime and tripling the number of breakdowns.
We exploit a 10 years-panel database of more than 3500 elevators to investigate the impact of the law on quality. Using the elevators not targeted by the law as a control group (’new’ elevators), our difference-in-difference approach shows that the law increased the number of failures by 15% and downtime by 45%. We consider these estimates to represent the lower bound of the overall effect, however, because we also identify an adverse quality spillover on our controlgroup. This paper demonstrates how well intended safety regulations, involving substantial amounts of investment, can have unintended knock-on effects in the regulated area and even beyond.