A Model of Worker Investment in Safety and its Effects on Accidents and Wages

43 Pages Posted: 22 Jun 2013 Last revised: 25 Apr 2023

See all articles by José Guardado

José Guardado

American Medical Association

Nicolas R. Ziebarth

Cornell University

Abstract

In this paper, we develop a theoretical model of worker investment in safety. Standard theory assumes that injury risk is exogenous. It predicts that riskier jobs are associated with higher wages. In contrast, in our model, workers make individual safety investments that reduce the risk of injury. This results in a negative association between individual injury risk and wages. We test the model's predictions using obesity as a proxy for worker disinvestments in human capital and safety. In line with our model predictions, we find a significant positive compensating wage differential (CWD) for nonfatal risk at the occupational level. At the same time, however, there exists an underlying significant negative association between individual accident risk and wages, but only in high risk occupations. The latter relationship may downward bias or mask CWD estimates.

Keywords: compensating wage differential, safety, worker investment, nonfatal risk, obesity

JEL Classification: I10, I12, J24, J31, J62, J71

Suggested Citation

Guardado, José and Ziebarth, Nicolas R., A Model of Worker Investment in Safety and its Effects on Accidents and Wages. IZA Discussion Paper No. 7428, Available at SSRN: https://ssrn.com/abstract=2283543 or http://dx.doi.org/10.2139/ssrn.2283543

José Guardado (Contact Author)

American Medical Association ( email )

No Address Available

Nicolas R. Ziebarth

Cornell University ( email )

Ithaca, NY
United States

HOME PAGE: http://www.human.cornell.edu/bio.cfm?netid=nrz2

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