Workers’ Risk Underestimation and Occupational Health and Safety Regulation
The standard treatment of occupational risk in the labour market is conducted in terms of the theory of compensating wage differentials, the basic characteristic of which is that workers can fully estimate actual occupational risks. However, research in cognitive psychology, and recent advances in economic psychology, suggest that individuals consistently underestimate risks associated with accidents. In this paper, we discuss the case when the workers systematically underestimate job risks. After presenting the standard treatment of occupational risks, and of health and safety at work regulation, we then proceed to incorporate the idea of job risk underestimation. The paper discusses the types and impact of regulation on health and safety effort in a simple framework in which workers’ beliefs concerning accident risks also play a role. The paper shows that a particular type of regulatory intervention is necessary for the risk underestimating workers not to suffer a welfare loss.
|Date of creation:||Mar 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Scholz, John T & Gray, Wayne B, 1990. "OSHA Enforcement and Workplace Injuries: A Behavioral Approach to Risk Assessment," Journal of Risk and Uncertainty, Springer, vol. 3(3), pages 283-305, September.
- Yolande Hiriart & David Martimort & Jérôme Pouyet, 2010.
"The public management of risk: Separating ex ante and ex post monitors,"
- Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2010. "The public management of risk: Separating ex ante and ex post monitors," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1008-1019, December.
- Yolande Hiriart & David Martimort & Jérôme Pouyet, 2009. "The public management of risk: Separating ex ante and ex post monitors," PSE Working Papers halshs-00566863, HAL.
- Yolande Hiriart & David Martimort & Jerome Pouyet, 2010. "The Public Management of Risk: Separating Ex Ante and Ex Post Monitors," Working Papers 2010.144, Fondazione Eni Enrico Mattei.
- repec:zbw:rwirep:0364 is not listed on IDEAS
- W. Kip Viscusi, 1986. "The Impact of Occupational Safety and HealthRegulation, 1973-83," University of Chicago - George G. Stigler Center for Study of Economy and State 40, Chicago - Center for Study of Economy and State.
- Paul Lanoie, 1992. "The Impact of Occupational Safety and Health Regulation on the Risk of Workplace Accidents: Quebec, 1983-87," Journal of Human Resources, University of Wisconsin Press, vol. 27(4), pages 643-660.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
- Peter Dorman & Paul Hagstrom, 1998. "Wage Compensation for Dangerous Work Revisited," ILR Review, Cornell University, ILR School, vol. 52(1), pages 116-135, October.
- Viscusi, W. Kip, 1998. "Rational Risk Policy: The 1996 Arne Ryde Memorial Lectures," OUP Catalogue, Oxford University Press, number 9780198293637.
- Barry Reilly & Pierella Paci & Peter Holl, 1995. "Unions, Safety Committees and Workplace Injuries," British Journal of Industrial Relations, London School of Economics, vol. 33(2), pages 275-288, 06.
- Michael Spence, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 561-572.
- Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
- Kevin Purse, 2004. "Work-related fatality risks and neoclassical compensating wage differentials," Cambridge Journal of Economics, Oxford University Press, vol. 28(4), pages 597-617, July.
- Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
- Barmby, Tim A. & Ercolani, Marco G. & Treble, John G., 2000.
"Sickness Absence: An International Comparison,"
IRISS Working Paper Series
2000-03, IRISS at CEPS/INSTEAD.
- J.A. den Hertog, 2010. "Review of economic theories of regulation," Working Papers 10-18, Utrecht School of Economics.
- W. Kip Viscusi, 1996. "Economic Foundations of the Current Regulatory Reform Efforts," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 119-134, Summer.
- Bhattacharya, Jay & Goldman, Dana & Sood, Neeraj, 2009. "Market evidence of misperceived mortality risk," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 451-462, October.
- Bartel, Ann P & Thomas, Lacy Glenn, 1985. "Direct and Indirect Effects of Regulation: A New Look at OSHA's Impact," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 1-25, April.
- François Salanié & Nicolas Treich, 2009. "Regulation in Happyville," Economic Journal, Royal Economic Society, vol. 119(537), pages 665-679, 04.
- Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 48(Jun).
- Böckerman, Petri & Ilmakunnas, Pekka, 2008. "Interaction of working conditions, job satisfaction, and sickness absences: Evidence from a representative sample of employees," Social Science & Medicine, Elsevier, vol. 67(4), pages 520-528, August.
- Sidney A. Shapiro, 2009. "Occupational Safety and Health Regulation," Chapters, in: Labor and Employment Law and Economics, chapter 9 Edward Elgar Publishing.
- Timothy W. Guinnane & Jochen Streb, 2012.
"Incentives that saved lives: Government regulation of accident insurance associations in Germany, 1884-1914,"
1013, Economic Growth Center, Yale University.
- Guinnane, Timothy & Streb, Jochen, 2012. "Incentives That Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884-1914," Working Papers 104, Yale University, Department of Economics.
- Guinnane, Timothy & Streb, Jochen, 2012. "Incentives that Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884–1914," Ruhr Economic Papers 364, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- Biddle, Jeff E & Zarkin, Gary A, 1988. "Worker Preferences and Market Compensation for Job Risk," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 660-67, November.
- N. Philipsen, 2009. "Compensation for industrial accidents and incentives for prevention: a theoretical and empirical perspective," European Journal of Law and Economics, Springer, vol. 28(2), pages 163-183, October.
- Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
- Viscusi, W. Kip, 2007.
"Regulation of Health, Safety, and Environmental Risks,"
Handbook of Law and Economics,
- W. Kip Viscusi, 2006. "Regulation of Health, Safety, and Environmental Risks," NBER Working Papers 11934, National Bureau of Economic Research, Inc.
- 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.
- Sandmo, Agnar, 1983. "Ex Post Welfare Economics and the Theory of Merit Goods," Economica, London School of Economics and Political Science, vol. 50(197), pages 19-33, February.
- Ose, Solveig Osborg, 2005. "Working conditions, compensation and absenteeism," Journal of Health Economics, Elsevier, vol. 24(1), pages 161-188, January.
- John F. Burton, 2009. "Workersâ€™ Compensation," Chapters, in: Labor and Employment Law and Economics, chapter 8 Edward Elgar Publishing.
- Viscusi, W. Kip, 1980. "Imperfect job risk information and optimal workmen's compensation benefits," Journal of Public Economics, Elsevier, vol. 14(3), pages 319-337, December.
- Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April.
- Hammond, Peter J, 1981. "Ex-ante and Ex-post Welfare Optimality under Uncertainty," Economica, London School of Economics and Political Science, vol. 48(191), pages 235-50, August.
- Cantor, Richard, 1987. "Long-term contracts, consumption smoothing and wage-profit dynamics," Journal of Macroeconomics, Elsevier, vol. 9(1), pages 59-70.
- W. Kip Viscusi, 1986. "The Impact of Occupational Safety and Health Regulation, 1973-1983," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 567-580, Winter.
- Sunstein, Cass R, 2000. "Cognition and Cost-Benefit Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 29(2), pages 1059-1103, June.
- Wayne B. Gray & John M. Mendeloff, 2005. "The Declining Effects of Osha Inspections on Manufacturing Injuries, 1979â€“1998," ILR Review, Cornell University, ILR School, vol. 58(4), pages 571-587, July.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:29643. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.