Did We Overestimate the Value of Health?
23 Pages Posted: 10 Nov 2000
Date Written: October 12, 2000
Abstract
Adam Smith's idea that wage differences reveal preferences for risk rests on firm theoretical foundations. This paper argues, however, that the standard approach to identify these differentials in practice may be flawed. Empirical practice usually identifies compensating wage differentials for risk by regressing individual wages on aggregate measures of risk, usually industry or occupation average risk. If jobs differ within industries or occupations, the "aggregate approach" may identify arbitrary compensating differentials for risk. In a dataset with precise information on job risk as well as aggregate risk, I demonstrate that using aggregate risk identifies wage differentials that are two to five times larger than wage differentials based on job risk information. This result is robust to controlling for time constant unobserved individual or job heterogeneity.
JEL Classification: J17, J31
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?
By David Card, Raj Chetty, ...
-
The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?
By David Card, Raj Chetty, ...
-
Job Creation and Job Destruction in a Regulated Labour Market: The Case of Austria
By Florian Stahl, Alfred Stiglbauer, ...
-
Job Creation and Job Destruction in a Regulated Labor Market: The Case of Austria
By Alfred Stiglbauer, Florian Stahl, ...
-
Unemployment Insurance and Duration of Unemployment: Evidence from Slovenia's Transition
-
By Emilia Del Bono and Andrea Weber
-
Why is There a Spike in the Job Finding Rate at Benefit Exhaustion?
By Jan Boone and Jan C. Van Ours
-
Why is there a Spike in the Job Finding Rate at Benefit Exhaustion?
By Jan Boone and Jan C. Van Ours
-
Why is There a Spike in the Job Finding Rate at Benefit Exhaustion?
By Jan Boone and Jan C. Van Ours
-
Why is There a Spike in the Job Finding Rate at Benefit Exhaustion?
By Jan Boone and Jan C. Van Ours