II. Hedonic analysis: The next set of questions makes a series of distinct points about hedonic analysis and hedonic reasoning. 1. Toby is a graphic designer living outside Rustland, a city that is heavily polluted. Toby dislikes the pollution, but he is paid well and the housing is cheap in Rust-land. He is offered an opportunity to move to his company's office in Breathwell, an idyllic seaside community. But, after looking into it, he discovers that housing prices are very high in Breathwell. He decides that the lower pollution is worth the higher cost, but he tells his company that he wants a pay increase to cover the higher cost of living in Breathwell. Does it make sense for his company to compensate Toby for a higher cost of living if he wants to move to Breathwell? Briefly explain why or why not. 2.The primary source of estimates of the value of statistical life are from studies that trade off wages with mortality risk. Greenstone, Ryan and Yankovich (2012) study how bonuses (a wage increase) cause members of the US Army to reenlist. They observe various bonus levels and they observe different levels of implied risk from service, due to differences in the roles (jobs) that service members have, as well as the types of combat situations currently taking place. They find a VSL that is less than half of standard estimates based on the wider US job market. This smaller estimate is not surprising. Briefly explain why you would expect their study to reveal a low estimate
II. Hedonic analysis: The next set of questions makes a series of distinct points about hedonic analysis and hedonic reasoning.
1. Toby is a graphic designer living outside Rustland, a city that is heavily polluted. Toby dislikes the pollution, but he is paid well and the housing is cheap in Rust-land. He is offered an opportunity to move to his company's office in Breathwell, an idyllic seaside community. But, after looking into it, he discovers that housing prices are very high in Breathwell. He decides that the lower pollution is worth the higher cost, but he tells his company that he wants a pay increase to cover the higher cost of living in Breathwell. Does it make sense for his company to compensate Toby for a higher cost of living if he wants to move to Breathwell? Briefly explain why or why not.
2.The primary source of estimates of the value of statistical life are from studies that trade off wages with mortality risk. Greenstone, Ryan and Yankovich (2012) study how bonuses (a wage increase) cause members of the US Army to reenlist. They observe various bonus levels and they observe different levels of implied risk from service, due to differences in the roles (jobs) that service members have, as well as the types of combat situations currently taking place. They find a VSL that is less than half of standard estimates based on the wider US job market. This smaller estimate is not surprising. Briefly explain why you would expect their study to reveal a low estimate
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