Drakopoulos, Stavros A. and Theodossiou, Ioannis (2011): Workers’ Risk Underestimation and Occupational Health and Safety Regulation.
Download (99kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Workers’ Risk Underestimation and Occupational Health and Safety Regulation|
|Keywords:||Job Risk; Occupational Health and Safety|
|Subjects:||K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law
J - Labor and Demographic Economics > J8 - Labor Standards: National and International > J81 - Working Conditions
I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health
|Depositing User:||Stavros A. Drakopoulos|
|Date Deposited:||17. Mar 2011 14:54|
|Last Modified:||23. Mar 2015 10:22|
Bartel, A. and Thomas, L. (1985) “Direct and indirect effects of OSHA regulation: A new look at OSHA’s impact,” Journal of Law and Economics vol.8(1), pp.1-25.
Bernstein, P. (1996) Against the Gods: The Remarkable Story of Risk, New York: John Wiley & Sons.
Besley, T. (1988) A simple model for merit good arguments, Journal of Public Economics, vol. 35, 371–83.
Biddle, J. E and Zarkin, G. A. (1988) “Source worker preference and market compensation for job risk”, Review of Economics and Statistics, 70(4), pp.660-667.
Bockerman, P. and Illmakunnas, P. (2008) “Interaction of working conditions, job satisfaction, and sickness absences: Evidence from a representative sample of employees, Social Science and Medicine, 67, pp.520–528.
Borjas, G. (2010) Labor Economics, 5th edition, McGraw-Hill.
Cantor, R. (1987) “Long term contracts, consumption smoothing and wage-profit dynamics”, Journal of Macroeconomics, vol.9, (1), pp.59-70.
Denscobe, M. (1993) “Personal health and the social psychology of risk taking”, Health Education Research, 8(4), pp.505-517.
Ehrenberg, R. G. and Smith, R. (1997) Modern Labor Economics: Theory and Public Policy, New York: Addison-Wesley.
Furnham, A. (1988) Lay Theories, Oxford: Pergamon.
Gilbert, D. (2006) Stumbling on Happiness, London: Harper Press.
Gilovich, T., Griffin, D. and Kahneman, D. (2002) Heuristics and Biases: The Psychology of Intuitive Judgment, Cambridge: Cambridge University Press.
Hird, J. (1994) Superfund: The Political Economy of Environmental Risk, Baltimore: John Hopkins University Press.
Kahneman, D., and Tversky, A. (1979) “Prospect theory: An analysis of decisions under risk”, Econometrica, 47, pp.313-327.
Kahneman, D., and Tversky, A. (Eds.) (2000) Choices, Values and Frames. New York: Cambridge University Press.
Kahneman, D., Slovic, P., and Tversky, A. (1982) Judgment under Uncertainty: Heuristics and Biases, New York: Cambridge University Press.
Lanoie P. (1992) “The impact of occupational safety and health regulation on the risk of workplace accidents: Quebec, 1983–87”, Journal of Human Resources, 27(4), pp.643–660.
Lloyd, A.J. (2001) “The extent of patients’ understanding of the risk of treatments”, Quality and Safety in Health Care, 10, pp.i14-i18.
Mendeloff, J.M. (1979) Regulating Safety: An Economic and Political Analysis of Occupational Safety and Health Policy. Cambridge, Mass: MIT Press.
Mendeloff, J.M. (2005) “Inside the black box: How do OSHA inspections lead to reductions in workplace injuries”, Law and Policy, 27 (2), pp.219-237.
Michie, S. and Williams, S. (2003) “Reducing work-related psychological ill health and sickness absence: a systematic literature review”, Occupational and Environment Medicine, 60, pp.3–9.
Ose, S.O. (2005) “Working conditions, compensation and absenteeism”, Journal of Health Economics, 24, pp.161–188.
Purse, K. (2004) “Work-related fatality risks and neoclassical compensating wage differentials”, Cambridge Journal of Economics, vol.28, pp.597-617.
Rogers AE, Addington-Hall JM, and Abery AJ 2000) “Knowledge and communication difficulties for patients with chronic heart failure: qualitative study”. British Medical Journal, 321, pp. 605–7.
Romer, D., (2001) Advanced Macroeconomics, McGraw-Hill Higher Education, Boston.
Rosen, S., (1986) “The theory of equalizing differences”, in Ashenfelter, O., Layard, R. (Eds.), The Handbook of Labor Economics, North Holland, Amsterdam.
Ruser A and Smith, R. (1991) “Re-estimating OSHA effects”, Journal of Human Resources, vol.26, pp.212-236.
Salanie, F and Treich, N. (2009). Regulation in Happyville, The Economic Journal, vol.119, pp.665-679.
Sandmo, A. (1983) “Ex post welfare and the theory of merit goods”, Economica, vol. 50, pp. 19–34.
Scholz, J. and Gray, W. (1990) “OSHA Enforcement and Workplace Injuries: A Behavioral Approach to Risk Assessment”, Journal of Risk and Uncertainty, 3, pp.283-305.
Slovic P, Fischhoff B, and Lichtenstein S. (1982) “Facts versus fears: understanding perceived risk”, in Kahneman D, Slovic P, Tversky A, (eds) Judgement under Uncertainty: Heuristics and Biases. Cambridge: Cambridge University Press: 463–89.
Slovic P. (2000) The Perception of Risk, London: Earthscan Publications.
Sunstein, C.R. and R.H. Thaler, (2003) “Libertarian Paternalism”, American Economic Review, Papers and Proceeedings, 93, pp. 175-79.
Thaler, R.H., C.R. Sunstein, (2008) Nudge – Improving Decisions about Health, Wealth and Happiness. Chicago: Yale University Press.
Tversky, A., and Kahneman, D. (1974) “Judgment under uncertainty: Heuristics and biases”, Science, 18, pp.1124-1131.
Viscusi, W. K. (1986) “The impact of occupational safety and health regulation, 1973-1983,” Rand Journal of Economics 17 (2), pp.567-80.
Viscusi, W. K., (1993) “The value of risks to life and health”, Journal of Economic Literature, 31(4), pp.1912-1946.
Viscusi, W.K. (1998) Rational Risk Policy, Oxford: Oxford University Press.
Weinstein, N.D. (1989) “Optimistic biases about personal risks”, Science, 246, pp.1232–3.