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Differences in Subjective Risk Thresholds: Worker Groups as an Example

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Anil Gaba & W. Kip Viscusi, 1998. "Differences in Subjective Risk Thresholds: Worker Groups as an Example," Management Science, INFORMS, vol. 44(6), pages 801-811, June.
  • Handle: RePEc:inm:ormnsc:v:44:y:1998:i:6:p:801-811
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    File URL: http://dx.doi.org/10.1287/mnsc.44.6.801
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    References listed on IDEAS

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    1. Kenneth R. MacCrimmon & Donald A. Wehrung, 1990. "Characteristics of Risk Taking Executives," Management Science, INFORMS, vol. 36(4), pages 422-435, April.
    2. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    3. Viscusi, W Kip & O'Connor, Charles J, 1984. "Adaptive Responses to Chemical Labeling: Are Workers Bayesian Decision Makers?," American Economic Review, American Economic Association, vol. 74(5), pages 942-956, December.
    4. Anil Gaba & Robert L. Winkler, 1992. "Implications of Errors in Survey Data: A Bayesian Model," Management Science, INFORMS, vol. 38(7), pages 913-925, July.
    5. Donald Morrison & George Brockway, 1979. "A modified beta binomial model with applications to multiple choice and taste tests," Psychometrika, Springer;The Psychometric Society, vol. 44(4), pages 427-442, December.
    6. Carl S. Spetzler & Carl-Axel S. Staƫl Von Holstein, 1975. "Exceptional Paper--Probability Encoding in Decision Analysis," Management Science, INFORMS, vol. 22(3), pages 340-358, November.
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    Citations

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    Cited by:

    1. Thomas Leoni, 2010. "What drives the perception of health and safety risks in the workplace? Evidence from European labour markets," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(2), pages 165-195, May.
    2. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    3. W. Kip Viscusi, 2016. "Risk Beliefs and Preferences for E-cigarettes," American Journal of Health Economics, MIT Press, vol. 2(2), pages 213-240, Spring.

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