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Did We Overestimate the Value of Health?

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  • Lalive, Rafael

Abstract

Adam Smith's idea that wage differences reveal preferences for risk rests on strong theoretical foundations. This paper argues, however, that the dominant approach to identify compensating wage differentials--regressing individual wages on aggregate measures of risk--may lead to arbitrary estimates of these risk differentials. In a dataset with information on both, the incidence of illnesses or injuries across firms and industries, I calculate an implicit value of one injury or illness of about (1990) USD 18,800 pursuing the dominant approach. In contrast, regressing wages on the incidence of risk across firms produces a value of one injury or illness of about USD 11,300. Copyright 2003 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 27 (2003)
Issue (Month): 2 (October)
Pages: 171-93

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Handle: RePEc:kap:jrisku:v:27:y:2003:i:2:p:171-93

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Web page: http://www.springerlink.com/link.asp?id=100299

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Cited by:
  1. Black, Dan A & Kniesner, Thomas J, 2003. " On the Measurement of Job Risk in Hedonic Wage Models," Journal of Risk and Uncertainty, Springer, vol. 27(3), pages 205-20, December.
  2. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2010. "An Inquiry Into The Theory, Causes And Consequences Of Monitoring Indicators Of Health And Safety At Work," SIRE Discussion Papers 2010-120, Scottish Institute for Research in Economics (SIRE).
  3. Goucher, Jeremy & Horrace, William C., 2012. "The value of life: Real risks and safety-related productivity in the Himalaya," Labour Economics, Elsevier, vol. 19(1), pages 27-32.
  4. Andreas Kuhn & Oliver Ruf, 2009. "The Value of a Statistical Injury: New Evidence from the Swiss Labor Market," NRN working papers 2009-15, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  5. Wehn-Jyuan Tsai & Jin-Tan Liu & James Hammitt, 2011. "Aggregation Biases in Estimates of the Value per Statistical Life: Evidence from Longitudinal Matched Worker-Firm Data in Taiwan," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(3), pages 425-443, July.
  6. Emilia Del Bono & Andrea Weber, 2008. "Do Wages Compensate for Anticipated Working Time Restrictions? Evidence from Seasonal Employment in Austria," Journal of Labor Economics, University of Chicago Press, vol. 26, pages 181-221.
  7. repec:ese:iserwp:2006-37 is not listed on IDEAS
  8. Xiangdong Wei, 2007. "Wage compensation for job-related illness: Evidence from a matched employer and employee survey in the UK," Journal of Risk and Uncertainty, Springer, vol. 34(1), pages 85-98, February.

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