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Valuing Risk in the Workplace: Market Price, Willingness to Pay, and the Optimal Provision of Safety

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  • Herzog, Henry W, Jr
  • Schlottmann, Alan M
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    Abstract

    The theory of compensating wage differentials, attributable to Adam Smith, suggests that jobs with disagreeable characteristics will command high wages, ceteris paribus. Most empirical tests of this theory with hedonic wage equations implicitly assume that workers' willingness to pay for risk reduction (safety) in the workplace through diminished wages and market valuations of the "price" of these reductions are equivalent. It is shown that this is not the case within the manufacturing sector where willingness to pay exceeds the price (cost) of risk reduction at current levels of risk exposure. Implications for implied value of life estimates are also examined. Copyright 1990 by MIT Press.

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    Bibliographic Info

    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 72 (1990)
    Issue (Month): 3 (August)
    Pages: 463-70

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    Handle: RePEc:tpr:restat:v:72:y:1990:i:3:p:463-70

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Dora L. Costa & Matthew E. Kahn, 2004. "Changes in the Value of Life, 1940--1980," Journal of Risk and Uncertainty, Springer, vol. 29(2), pages 159-180, 09.
    2. S. Madheswaran, 2008. "Measuring the Value of Life and Limb: Estimating Compensating Wage Differentials Among Workers in Chennai and Mumbai," Working Papers id:1708, eSocialSciences.
    3. Ommeren, Jos van & Berg, Gerard J. van den & Gorter, Cees, 1998. "Estimating the marginal willingness to pay for commuting," Serie Research Memoranda 0046, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    4. Bellavance, Franois & Dionne, Georges & Lebeau, Martin, 2009. "The value of a statistical life: A meta-analysis with a mixed effects regression model," Journal of Health Economics, Elsevier, vol. 28(2), pages 444-464, March.
    5. Böckerman, Petri & Ilmakunnas, Pekka, 2007. "Job disamenities, job satisfaction, quit intentions, and actual separations: putting the pieces together," MPRA Paper 3245, University Library of Munich, Germany.
    6. Cottini, Elena & Kato, Takao & Westergaard-Nielsen, Niels, 2011. "Adverse workplace conditions, high-involvement work practices and labor turnover: Evidence from Danish linked employer–employee data," Labour Economics, Elsevier, vol. 18(6), pages 872-880.
    7. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
    8. 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).
    9. Scott, Anthony, 2001. "Eliciting GPs' preferences for pecuniary and non-pecuniary job characteristics," Journal of Health Economics, Elsevier, vol. 20(3), pages 329-347, May.
    10. S. Madheswaran, 2007. "Measuring the value of statistical life: estimating compensating wage differentials among workers in India," Social Indicators Research, Springer, vol. 84(1), pages 83-96, October.
    11. STEVEN C. DELLER & Thomas Ottem, 2001. "Crime and the Quality of Life in Wisconsin Counties," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 442, Wisconsin-Madison Agricultural and Applied Economics Department.
    12. Van Ommeren, Jos & Fosgerau, Mogens, 2009. "Workers' marginal costs of commuting," Journal of Urban Economics, Elsevier, vol. 65(1), pages 38-47, January.

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