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was 0.0352 which means that the increase in risk with 0.001 will pay $ 3.52 more in a week than other jobs without risk. This amount in each year is an amount of $ 176 per year (3.52 * 50 weeks = 176). This amount is based on the regression slope on an annual basis will be $ 176, 000 (= 0.0352 * 50 * 105).

 

The interpretation of this is to believe that 1000 male workers employed in a job that has a higher risk of death of 0.001 per year. So based on the average, one person will die annually. The regression indicates that each of these men is willing to work for $ 175 less paid in each year if the probability of death in the work had been reduced from 0,001 to 0. Therefore, they will pay a total amount of $ 176,000 to eliminate death and the value of saving lives will be $ 176,000. It is also correct to interpret that the companies that offers this jobs including 0,001 additional probability of death must spend more than $ 176,000 to reduce the probability of dying to zero (ibid: 292).

 

By including dummy variables the coefficient of risk increased to 0.0520 and almost no changes in standard error. Using exactly the same arguments mentioned above, the value of a life would be then $ 260,000. Estimated value of life was around the $ 200,000 $ 60,000.

 

Viscusi (1978)

 

In another paper written by Viscusi (1978) he discusses the effect of wealth and income as a price for hazards on the job. If a job creates health hazards or the risk of loss of life is great, a worker that will / should work there will require greater compensation or non-pecuniary benefits to accept work in the risky position (Viscusi 1978: 408).

 

In this paper Viscusi describes the theory of individual choice that takes potential hazardous jobs where the employee's preferences depend on the outcome of the state of health. One explanation may be that the risk in a job where the worker chooses to be negatively related to his wealth. The second purpose of this paper was to determine the nature of the worker's job and his personal character (ibid: 408).

 

Based on Adam Smith's view, several worked tried to study this notion further. Oi (1973) has studied and he has concluded that the selection of non-hazardous jobs will lead to reduction in pay. He also points out that working with a greater risk of danger will compensate the risk with higher pay. Thaler and Rosen (1976) have attempted to extend Oi ——s method and considering the situation where the employee meets the choice between life and death. Compensation for an unreasonable outcome (such as death) can be explained by a bequest function. The method used here can also be viewed as an analysis of probable generalization of compensating differential. It is not of the same nature as that the individual utility function depends on the individual’s health state.

 

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