How to measure the statistical values of a life suppose there are 2 jobs that differ only in
ly mobile between jobs.
Then , in equilibrium, it must be the case that:
Where wi= wage component of compensation
Ai= negative monetary value associated with the likelihood of death on the job
Suppost job 1 is perfectly safe, so A1=0 then:
Let W1= $50,000/ year
Suppose, too, that the likelihood of dying in job 2 during any given year is 1 in 10,000
Denote this rish using small Greek rho, p=1/10,000
And finally, suppose we know that A2 takes the form
A2=-p x c
Where C is the compensation required per unit risk, p.
W2=$50,000 + 1/10,000C
C is higher, the more people value their lives. And the more people value their lives, the
higer the wage in the dangerous job will be in equilibrium.
Suppose, that, in equilibrium,
Clearly, A2= $200/yr
This means that 10,000 people would be willing to accept 1 death per year amongst them
(remember, p=1/10,000) in return for a total payment of: