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Differences in Subjective Risk Thresholds: Worker Groups as an Example

  • Anil Gaba

    (INSEAD, Boulevard de Constance, Fontainebleau 77305, France)

  • W. Kip Viscusi

    (John F. Cogan Jr. Professor of Law and Economics, Harvard Law School, Hauser 302, Cambridge, Massachusetts 02138)

Subjective risk perceptions are often encoded as responses to 0-1 questions in surveys or other qualitative risk scales. However, reference points for assessing an activity as risky are confounded by various characteristics of the respondents. This paper uses a sample of workers for whom quantitative risk assessments as well as dichotomous risk perception responses are available. It is shown that, given a quantitative risk measure, the thresholds for assessing an activity as "risky" vary systematically, particularly by education. The differences in such thresholds across worker groups are estimated. The resulting implications of using qualitative risk variables for assessing wage-risk tradeoffs are estimated, yielding results that are also relevant for many other areas involving similar qualitative variables.

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File URL: http://dx.doi.org/10.1287/mnsc.44.6.801
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 44 (1998)
Issue (Month): 6 (June)
Pages: 801-811

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Handle: RePEc:inm:ormnsc:v:44:y:1998:i:6:p:801-811
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