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Question

The following equation relates the natural log of wages, W, to risk, R, and a vector of covariates, X:

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lnW = bo +b1*R + C*X.


lnW is the natural log of W.  Assume that  W = 30,000, b1 = 0.15 and the change in risk being considered is a 1 in 3,000 increase in the probability of death.  Note also that dW/W = 0.15.


A.  What would an individual worker need to be paid to be willing to incur this 1 in 3,000 increased risk of death?


B. What is the statistical value of a life, based upon this wage equation? 

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