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Reservation price
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amount where a workers wage would have to be increased in order for the worker to willingly switch from a sage to risky job
w1-w0
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Reservation price
amount where a workers wage would have to be increased in order for the worker to willingly switch from a sage to risky job
w1-w0
the supply curve (labor to risky jobs reveals:
how many workers are willing to offer their labor to the risky job, as a function of the wage differential between the risky and safe job
the supply curve is:
upward sloping
as the wage gap between thee risky and safe job increases:
more workers are willing to work the risky job
the demand curve is:
downward sloping
why will fewer firms offer risky working conditions
if they have to pay higher wages to attract workers
isoprofit curves are ______ and reflect _________
-upward sloping (reflects how costly safety is)
flat slope isoprofit curve
accounting firm - easy to make safe
steep slope isoprofit curve
coal mining - difficult to make safe
If they make a job safer, what must they do?
reduce wages
a higher curve =
lower profit
why is an isoprofit curve concave?
its likely to be diminishing marginal returns to expenditures that reduce a firms risk of injury
steep indifference curve
doesn't like risk (higher reservation price for risk)
flatter indifference curve
doesn't mind risk (lower reservation price for risk)
offer safe work environment when
w1-w0 > p(fish1 - fish0)
offer risky work environment when
w1-w0 < p(fish1-fish0)
the hedonic wage function is
-the observed (equilibrium) relationship between wages and job characteristics arising from the interaction of workers and firms
value of statistical life
amount workers are jointly willing to pay to reduce the likelihood that one of them will suffer a fatal injury in any given year
R2-R1=.001
W2-W1= $5,000
1000 workers would pay ______ to save 1 statistical life
5000x1000
5 million
new regulation lowers risk of death by .001 per year, in a city with 500,000 people . This means it is expected to save ____lives/year
500,000/.001
500
VSL is 5mill, and its saves 500 lives per year, then the value of the regulation is
500x5mill
2.5bill
Ex
a) 1/20,000 and wage: 52,000
b) 1/30,000 and wage 54,000
1/20,000=.00005
1/30,000=.000033
r2-r1= .00005-.000033 = .000017
w2-w1= 54000-52000= 2000
2000/.000017
120 million
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