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Compensating Wage Differentials and the Endogeneity of Job Riskiness
The Review of Economics and Statistics
Vol. 70, No. 1 (Feb., 1988), pp. 9-16
Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/1928145
Page Count: 8
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Those with greater earnings capacity are likely to choose safer jobs, assuming safety is a normal good. Those who experience greater returns to job may choose riskier jobs. This paper estimates wage premia for risk of fatality and injury, allowing unobservables to affect earnings capacity and the returns to risk. As the endogeneity of job risk causes bias in OLS estimation, the model is estimated with simultaneous equations and modified selection bias techniques. The results indicate that unobserved heterogeneity in the returns isk is important and that OLS underestimates the wage premia for fatality and injury risk.
The Review of Economics and Statistics © 1988 The MIT Press