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Did We Overestimate the Value of Health?

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  • Lalive, Rafael

Abstract

Adam Smith's idea that wage differences reveal preferences for risk rests on strong theoretical foundations. This paper argues, however, that the dominant approach to identify compensating wage differentials--regressing individual wages on aggregate measures of risk--may lead to arbitrary estimates of these risk differentials. In a dataset with information on both, the incidence of illnesses or injuries across firms and industries, I calculate an implicit value of one injury or illness of about (1990) USD 18,800 pursuing the dominant approach. In contrast, regressing wages on the incidence of risk across firms produces a value of one injury or illness of about USD 11,300. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Lalive, Rafael, 2003. "Did We Overestimate the Value of Health?," Journal of Risk and Uncertainty, Springer, vol. 27(2), pages 171-193, October.
    • Handle: RePEc:kap:jrisku:v:27:y:2003:i:2:p:171-93
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    Cited by:

    1. Lavetti, Kurt & Schmutte, Ian M., 2023. "Gender differences in sorting on wages and risk," Journal of Econometrics, Elsevier, vol. 233(2), pages 507-523.
    2. Wehn-Jyuan Tsai & Jin-Tan Liu & James Hammitt, 2011. "Aggregation Biases in Estimates of the Value per Statistical Life: Evidence from Longitudinal Matched Worker-Firm Data in Taiwan," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(3), pages 425-443, July.
    3. Xiangdong Wei, 2007. "Wage compensation for job-related illness: Evidence from a matched employer and employee survey in the UK," Journal of Risk and Uncertainty, Springer, vol. 34(1), pages 85-98, February.
    4. Emilia Del Bono & Andrea Weber, 2008. "Do Wages Compensate for Anticipated Working Time Restrictions? Evidence from Seasonal Employment in Austria," Journal of Labor Economics, University of Chicago Press, vol. 26(1), pages 181-221.
    5. Konstantinos, Pouliakas & Ioannis, Theodossiou, 2010. "An Inquiry Into the Theory, Causes and Consequences of Monitoring Indicators of Health and Safety At Work," MPRA Paper 20336, University Library of Munich, Germany.
    6. Black, Dan A & Kniesner, Thomas J, 2003. "On the Measurement of Job Risk in Hedonic Wage Models," Journal of Risk and Uncertainty, Springer, vol. 27(3), pages 205-220, December.
    7. Andreas Kuhn & Oliver Ruf, 2009. "The Value of a Statistical Injury: New Evidence from the Swiss Labor Market," NRN working papers 2009-15, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    8. Jason Sockin, 2022. "Show Me the Amenity: Are Higher-Paying Firms Better All Around?," CESifo Working Paper Series 9842, CESifo.
    9. Andreas Kuhn & Oliver Ruf, 2013. "The Value of a Statistical Injury: New Evidence from the Swiss Labor Market," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(I), pages 57-86, March.
    10. Goucher, Jeremy & Horrace, William C., 2012. "The value of life: Real risks and safety-related productivity in the Himalaya," Labour Economics, Elsevier, vol. 19(1), pages 27-32.
    11. Kuhn, Andreas & Ruf, Oliver, 2009. "The Value of a Statistical Injury: New Evidence from the Swiss Labor Market," IZA Discussion Papers 4409, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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