Job Hazard Premia and Worker Risk Profiles

Abstract:

We provide a fresh analysis of the theory of compensating wage differentials (CWD) using detailed data on self-reported workplace environment conditions, from a representative 5-wave (1990-2010, 5-year spaced) panel survey of workers, which we merge to the Danish yearly longitudinal linked-employer-employee-data. Our study extends previous CWD empirical analysis in several ways. In standard hedonic wage equations, we control for both individual and firm-specific time-invariant unobserved heterogeneity. In addition, we can account for selection of workers into hazardous jobs by proxying for individual heterogeneity in risk attitudes with information on smoking behavior and having young children. In ongoing analysis, we also estimate the marginal willingness to pay for amenities using worker employment transition histories. Our preliminary findings are that accounting for both time-invariant and time-varying worker unobserved heterogeneity is crucial in this type of empirical exercise, and that, among a large host of job non-pecuniary characteristics that vary extensively in our data, only some job disamenities, such as worktime inflexibility, commuting to work, and monotonous job tasks, are compensated for.