The Economics of Working Environments: Evidence from Linked Survey and Register Data

We use a large-scale survey from Denmark to construct firm-level measures of the working environment capturing its physical, psychological and social elements. First, to validate our measures, we show that firms with better working environ- ments fare better in unannounced workplace inspections conducted by a govern- ment agency. Second, using register data, we show that firms with better working environments have longer employee tenures, and their employees are less likely to be hospitalized or to experience work-related accidents. Finally, firms with bet- ter working environments have higher labor productivity and, ultimately, better profitability. Collectively, our findings suggest that improving firms’ working en- vironments can be beneficial to both employees and shareholders.