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- Title
Compensating Wage Differentials with Unemployment: Evidence from China.
- Authors
Xiaoqi Guo; Hammitt, James K.
- Abstract
We estimate the economic value of mortality risk in China using the compensating-wage-differential method. We find a positive and statistically significant correlation between wages and occupational fatality risk. The estimated effect is largest for unskilled workers. Unemployment reduces compensation for risk, which suggests that some of the assumptions under which compensating wage differentials can be interpreted as measures of workers’ preferences for risk and income are invalid when unemployment is high. Workers may be unwilling to quit high-risk jobs when alternative employment is difficult to obtain, violating the assumption of perfect mobility, or some workers (e.g., new migrants) may be poorly informed about between-job differences in risk, violating the assumption of perfect information. These factors suggest our estimates of the value per statistical life (VSL) in China, which range from approximately US$30,000 to US$100,000, may be biased downward. Alternative estimates adjust for heterogeneity of risk within industry by assuming that risk is concentrated among low-skill workers. These estimates, which are likely to be biased downward, range from US$7,000 to US$20,000.
- Subjects
ECONOMIC forecasting; QUESTION (Logic); INPUT-output analysis; ECONOMIC statistics; ECONOMIC indicators; CONSERVATION easements; MANAGEMENT literature; MARKETING literature; PUBLIC servitudes
- Publication
Environmental & Resource Economics, 2009, Vol 42, Issue 2, p187
- ISSN
0924-6460
- Publication type
Article
- DOI
10.1007/s10640-008-9217-9