Workers’ Risk Underestimation and Occupational Health and Safety Regulation

Stavros Drakopoulos and Ioannis Theodossiou

MPRA Paper from University Library of Munich, Germany

Abstract: The standard treatment of occupational risk in the labour market is conducted in terms of the theory of compensating wage differentials, the basic characteristic of which is that workers can fully estimate actual occupational risks. However, research in cognitive psychology, and recent advances in economic psychology, suggest that individuals consistently underestimate risks associated with accidents. In this paper, we discuss the case when the workers systematically underestimate job risks. After presenting the standard treatment of occupational risks, and of health and safety at work regulation, we then proceed to incorporate the idea of job risk underestimation. The paper discusses the types and impact of regulation on health and safety effort in a simple framework in which workers’ beliefs concerning accident risks also play a role. The paper shows that a particular type of regulatory intervention is necessary for the risk underestimating workers not to suffer a welfare loss.

Keywords: Job Risk; Occupational Health and Safety (search for similar items in EconPapers)
JEL-codes: I18 J81 K32 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-hea, nep-lab, nep-law and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29643

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