Incomplete Disclosure: Evidence of Signaling and Countersignaling
The American Economic Journal, February 2018
In 2011, Maricopa County adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspections results between 2007 and 2013, we show that only 58 percent of the subsequent inspections led to online grade posting. Although the disclosure rate in general declines with inspection outcome, higher-quality A restaurants are less likely to disclose than lower-quality As. After examining potential explanations, we believe the observed pattern is best explained by a mixture of signaling and countersignaling: the better A restaurants use nondisclosure as a countersignal, while worse As and better Bs use disclosure to stand out from the other restaurants.
Inspection Technology, Detection and Compliance: Evidence from Florida Restaurant Inspections
RAND Journal of Economics, Winter 2014
In this article, we show that a small innovation in inspection technology can make substantial differences in inspection outcomes. For restaurant hygiene inspections, the state of Florida has introduced a handheld electronic device, the portable digital assistant (PDA), which reminds inspectors of about 1,000 potential violations that may be checked for. Using inspection records from July 2003 to June 2009, we find that the adoption of PDA led to 11% more detected violations and subsequently, restaurants may have gradually increased their compliance efforts. We also find that PDA use is significantly correlated with a reduction in restaurant‐related foodborne disease outbreaks.
Reputational Incentives for Restaurant Hygiene
The American Economic Journal, February 2009
How can consumers be assured that firms will endeavor to provide good quality when quality is unobservable prior to purchase? We test the hypothesis that reputational incentives are effective at causing restaurants to maintain good hygiene quality. We find that chain affiliation provides reputational incentives and franchised units tend to free-ride on chain reputation. We also show that regional variation in the degree of repeat customers affects the strength of reputational incentives for good hygiene at both chain and nonchain restaurants. Despite these incentives, a policy intervention in the form of posted hygiene grade cards causes significant improvements in restaurant hygiene.
Impact of Restaurant Hygiene Grade Cards on Foodborne Disease Hospitalizations in Los Angeles County
Journal of Environmental Health, March 2005
Although health departments routinely inspect restaurants to assess compliance with established hygienic standards, few data are available on the effectiveness of these efforts in preventing foodborne disease. The study reported here assessed the impact on foodborne-disease hospitalizations in Los Angeles County of a restaurant hygiene grading system that utilized publicly posted grade cards. The grading system was introduced in January 1998. Hospital discharge data on foodborne-disease hospitalizations were analyzed for Los Angeles County and, as a control, for the rest of California during the period 1993–2000. Ordinary least-squares regression analysis was done to measure the effect of the grading program on these hospitalizations. After baseline temporal and geographic trends were adjusted for, the restaurant hygiene grading program was associated with a 13.1 percent decrease (p < .01) in the number of foodborne-disease hospitalizations in Los Angeles County in the year following implementation of the program (1998). This decrease was sustained over the next two years (1999–2000). The results suggest that restaurant hygiene grading with public posting of results is an effective intervention for reducing the burden of foodborne disease.
The Effect of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards
Quarterly Journal of Economics, May 2003
This study examines the effect of an increase in product quality information to consumers on firms' choices of product quality. In 1998 Los Angeles County introduced hygiene quality grade cards to be displayed in restaurant windows. We show that the grade cards cause (i) restaurant health inspection scores to increase, (ii) consumer demand to become sensitive to changes in restaurants' hygiene quality, and (iii) the number of foodborne illness hospitalizations to decrease. We also provide evidence that this improvement in health outcomes is not fully explained by consumers substituting from poor hygiene restaurants to good hygiene restaurants. These results imply that the grade cards cause restaurants to make hygiene quality improvements.