Risk Perception, Dread, and the Value of Statistical Life: Evidence from Occupational Fatalities

Perry Singleton

No 263, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: In a model of occupational safety, biased perceptions of risk decrease welfare, which may justify government regulation. Bias is examined empirically by the correlation between subjective and objective risk, the former measured by self-reported exposure to death on the job. The correlation is negligible among workers with no high school diploma, consistent with underestimating risk in more dangerous occupations, and strongest among more educated workers when objective risk is specific to harmful and noxious substances, which in psychological studies rank high in dread. Biased perceptions of risk may also lead to biased estimates of value of statistical life. VSL estimates are negligible across all education levels using the all cause fatality rate, but consistently greater among more educated workers using the fatality rate due to harmful and noxious substances, upwards of $70 million and more. Optimal policy is considered, including an illustrative simulation of a risk ceiling.

Keywords: Compensating wage differentials; value of statistical life; occupational safety; risk perception (search for similar items in EconPapers)
JEL-codes: J31 J81 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2024-05
New Economics Papers: this item is included in nep-hea, nep-lma and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:263

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