A Model of Worker Investment in Safety and Its Effects on Accidents and Wages
AbstractIn this paper, we develop a theoretical model of worker investment in safety. Standard theory assumes that injury risk is exogenous. It predicts that riskier jobs are associated with higher wages. In contrast, in our model, workers make individual safety investments that reduce the risk of injury. This results in a negative association between individual injury risk and wages. We test the model's predictions using obesity as a proxy for worker disinvestments in human capital and safety. In line with our model predictions, we find a significant positive compensating wage differential (CWD) for nonfatal risk at the occupational level. At the same time, however, there exists an underlying significant negative association between individual accident risk and wages, but only in high risk occupations. The latter relationship may downward bias or mask CWD estimates.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7428.
Length: 43 pages
Date of creation: May 2013
Date of revision:
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Find related papers by JEL classification:
- I10 - Health, Education, and Welfare - - Health - - - General
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
- NEP-HEA-2013-06-24 (Health Economics)
- NEP-HRM-2013-06-24 (Human Capital & Human Resource Management)
- NEP-LAB-2013-06-24 (Labour Economics)
- NEP-LMA-2013-06-24 (Labor Markets - Supply, Demand, & Wages)
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