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Compensating Wage Differentials and the Duration of Wage Loss

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  • Hamermesh, Daniel S
  • Wolfe, John R

Abstract

A formal model of occupational choice is developed that shows the extent to which the compensation for increased duration exceeds that for increased risk. Using the Panel Study of Income Dynamics linked to industry data on injuries and unemployment, the authors find nearly all the compensating wage differential for losses due to workplace injuries is for increases in the duration of loss and similarly for losses due to cyclical unemployment. The compensating differentials for risk of injury are larger for union than for nonunion workers, while those for cyclical unemployment are smaller for union workers. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • Hamermesh, Daniel S & Wolfe, John R, 1990. "Compensating Wage Differentials and the Duration of Wage Loss," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 175-197, January.
  • Handle: RePEc:ucp:jlabec:v:8:y:1990:i:1:p:s175-97
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    References listed on IDEAS

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    1. Duncan, Greg J & Holmlund, Bertil, 1983. "Was Adam Smith Right after All? Another Test of the Theory of Compensating Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 366-379, October.
    2. Craig A. Olson, 1981. "An Analysis of Wage Differentials Received by Workers on Dangerous Jobs," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 167-185.
    3. Michael Hurd, 1980. "A Compensation Measure of the Cost of Unemployment to the Unemployed," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 225-243.
    4. James D. Adams, 1985. "Permanent Differences in Unemployment and Permanent Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 29-56.
    5. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-344, October.
    6. Butler, Richard J & Worrall, John D, 1983. "Workers' Compensation: Benefit and Injury Claims Rates in the Seventies," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 580-589, November.
    7. Robert S. Smith, 1979. "Compensating Wage Differentials and Public Policy: A Review," ILR Review, Cornell University, ILR School, vol. 32(3), pages 339-352, April.
    8. Topel, Robert H, 1984. "Equilibrium Earnings, Turnover, and Unemployment: New Evidence," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 500-522, October.
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