Estimating the value of safety with labour market data: Are the results trustworthy?

Hintermann, Beat and Alberini, Anna and Markandya, Anil. (2010) Estimating the value of safety with labour market data: Are the results trustworthy? Applied economics, 42. pp. 1085-1100.

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Official URL: http://edoc.unibas.ch/dok/A5840532

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We use a panel dataset of UK workers to look for evidence of compensating wage differentials for workplace risk, combined with risk data at the four-digit industry level.  We discuss various econometric problems associated with the hedonic wage approach, namely the instability of the estimates to specification changes, unobserved heterogeneity, and endogeneity. We find evidence of significant compensating wage differentials and VSL figures only under the most restrictive assumptions, i.e. when we assume that there is no unobserved heterogeneity and that all regressors are exogenous. However, the VSL values are large and vary dramatically with the inclusion or exclusion of industry and/or occupation dummies, as well as with the addition of nonfatal risk.  When we specify models that allow for heterogeneity and endogeneity of risk and of other regressors, we find no evidence of compensating wage differentials.  We conclude that if compensating differentials for risk exist, econometric problems and the changing nature of labor markets prevent us from observing them. We also conclude that models and techniques for panel data that account for unobserved heterogeneity and endogeneity present a completely different picture about compensating wage differentials than that inferred by most wage-risk studies, which have generally used single cross sections of data.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Public Economics / Public Finance (Hintermann)
UniBasel Contributors:Hintermann, Beat
Item Type:Article, refereed
Article Subtype:Research Article
Note:Publication type according to Uni Basel Research Database: Journal article
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Last Modified:12 Jun 2018 09:14
Deposited On:14 Sep 2012 07:10

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