The following equation relates the natural log of wages, W, to risk, R, and a vector of covariates, X: lnW = bo +b1*R + C*X. lnW is the natural log of W. Assume that W = 30,000, b1 = 0.15 and the change in risk being considered is a 1 in 3,000 increase in the probability of death. Note also that dW/W = 0.15. A. What would an individual worker need to be paid to be willing to incur this 1 in 3,000 increased risk of death? B. What is the statistical value of a life, based upon this wage equation?
The following equation relates the natural log of wages, W, to risk, R, and a vector of covariates, X: lnW = bo +b1*R + C*X. lnW is the natural log of W. Assume that W = 30,000, b1 = 0.15 and the change in risk being considered is a 1 in 3,000 increase in the probability of death. Note also that dW/W = 0.15. A. What would an individual worker need to be paid to be willing to incur this 1 in 3,000 increased risk of death? B. What is the statistical value of a life, based upon this wage equation?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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4. The following equation relates the natural log of wages, W, to risk, R, and a vector of covariates, X:
lnW = bo +b1*R + C*X.
lnW is the natural log of W. Assume that W = 30,000, b1 = 0.15 and the change in risk being considered is a 1 in 3,000 increase in the probability of death. Note also that dW/W = 0.15.
A. What would an individual worker need to be paid to be willing to incur this 1 in 3,000 increased risk of death?
B. What is the statistical value of a life, based upon this wage equation?
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