You have the following equation relating job risk R to wages W: W = .01*R + XB, where XB indicates control for the following confounders: education, job experience, and income. Assume W= annual wages=50,000 A. If the change in R = a 1 in 10,000 higher chance of death in a year, how much more would an individual need to be paid to be willing to assume this risk? B. What is the implied statistical value of a year of life based on this model? C. What do you think would happen to the estimated relationship between R and W if none of the three confounders were included in this model? Explain.
You have the following equation relating job risk R to wages W: W = .01*R + XB, where XB indicates control for the following confounders: education, job experience, and income. Assume W= annual wages=50,000 A. If the change in R = a 1 in 10,000 higher chance of death in a year, how much more would an individual need to be paid to be willing to assume this risk? B. What is the implied statistical value of a year of life based on this model? C. What do you think would happen to the estimated relationship between R and W if none of the three confounders were included in this model? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You have the following equation relating job risk R to wages W: W = .01*R + XB, where XB indicates control for the following confounders: education, job experience, and income. Assume W= annual wages=50,000
A. If the change in R = a 1 in 10,000 higher chance of death in a year, how much more would an individual need to be paid to be willing to assume this risk?
B. What is the implied statistical value of a year of life based on this model?
C. What do you think would happen to the estimated relationship between R and W if none of the three confounders were included in this model? Explain.
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