"Did we overestimate the value of health?"

Transcription

1 Research Collection Working Paper "Did we overestimate the value of health?" Author(s): Lalive, Rafael Publication Date: 2000 Permanent Link: Rights / License: In Copyright - Non-Commercial Use Permitted This page was generated automatically upon download from the ETH Zurich Research Collection. For more information please consult the Terms of use. ETH Library

2 Institute for Empirical Research in Economics University of Zurich Working Paper Series ISSN Working Paper No. 60 "Did we Overestimate the Value of Health?" Rafael Lalive October 2000

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17 ^46` Od dug/ Ulfkdug/ Qlfnhoo/ Vwhskhq dqg Ulfkdug Mdfnpdq +4<<4,1 Xqhpsor phqw= pdfurh0 frqrplf shuirupdqfh dqg wkh oderxu pdunhw1 R{irug= R{irug Xqlyhuvlw Suhvv1 ^47` Ohljk/ Sdxo M1 +4<<4,1 Qr Hylghqfh rq Frpshqvdwlqj Zdjhv iru Rffxsdwlrqdo Idwdolwlhv1 Lqgxvwuldo Uhodwlrqv 63= 6;506<81 ^48` Ohljk/ Sdxo M1 +4<<8,1 Frpshqvdwlqj Zdjhv/ Ydoxh ri d Vwdwlvwlfdo Olih/ dqg Lqwhu0Lqgxvwu Glhuhqwldov1 Mrxuqdo ri Hqylurqphqwdo Hfrqrplfv dqg Pdqdjhphqw 5;= ;60<:1 ^49` Prruh/ Plfkdho M dqg Nls Z1 Ylvfxvl +4<;;,1 Grxeolqj wkh Hvwlpdwhg Ydoxh ri Olih= Uh0 vxowv Xvlqj Qhz Rffxsdwlrqdo Idwdolw Gdwd1 Mrxuqdo ri Srolf Dqdo vlv dqg Pdqdjhphqw :+6,= 7:90<31 ^4:` Qlfnhoo/ Vwhskhq dqg Ulfkdug Od dug +4<<<,1 Oderu Pdunhw Lqvwlwxwlrqv dqg Hfrqrplf Shuirupdqfh1 lq Kdqgerrn ri Oderu Hfrqrplfv yro 6F/ hgv1 Ruoh Dvkhqihowhu dqg Gdylg Fdug1 Dpvwhugdp= Qruwk0Kroodqg1 ^4;` RHFG +4<<3,1 Hpsor phqw Rxworrn1 Sdulv= RHFG1 ^4<` RHFG +4<<7,1 Hpsor phqw Rxworrn1 Sdulv= RHFG1 ^53` Urvhq/ Vkhuzlq +4<;9,1 Wkh Wkhru ri Htxdol}lqj Glhuhqfhv1 lq Kdqgerrn ri Oderu Hfr0 qrplfv1 Hgv= Ruoh Dvkhqihowhu dqg Ulfkdug Od dug1 Dpvwhugdp= Qruwk0Kroodqg1 ^54` Wkdohu/ Ulfkdug dqg Vkhuzlq Urvhq +4<:9,1 Wkh Ydoxh ri Vdylqj d Olih= Hylghqfh iurp wkh Pdunhw1 lq Krxvhkrog surgxfwlrq dqg frqvxpswlrq1 Hg1= QhvwruH1Whuohfn m1 Fdpeulgjh= QEHU1 ^55` Ylvfxvl/ Nls Z1 +4<<6,1 Wkh Ydoxh ri Ulvnv wr Olih dqg Khdowk1 Mrxuqdo ri Hfrqrplf Olwhudwxuh 54=4<4504<791 48

18 Table 1. Comparing Austria to the United States United States Austria Incidence of injuries or illnesses a, b 7.0 c Institutions Unions density coordination 1 3 Outcomes Unemployment, Emp. / Pop., Labor Productivity, 1994 (US=100) GDP / Worker GDP / Hour Notes: Source Nickell and Layard (1999), US Dept of Labor, own calculations. a. (N/EH) x 200,000, where N is number of injuries and illnesses with days away from work, EH is total hours worked by all employees during the calendar year, and 200,000 is the base for 100 equivalent full-time workers. b. All incidences with at least one workday lost. c. All incidences with at least 4 weeks of workdays lost (see Section 3 for details).

19 Table 2. Occupational injury and illness risks, Firm vs Industry Mean Variance Risk measured at... Industry level Firm level Deviations from industry mean Number of industries Number of firms Notes: Source: own calculations. Definition of Incidence: see notes to Table 1

20 Table 3. Compensation for Illness Risk A B C D Risk measured at Industry level Firm level Industry level Firm level Illness Risk ** ** ** ** (0.0040) (0.0005) (0.0018) (0.0003) Illness Sqared / ** ** ** (0.1720) (0.0073) (0.0653) (0.0034) Illness * Tenure / ** ** ** ** (0.0002) (0.0403) (0.0002) (0.0248) Individual fixed effects No No Yes Yes Risk differential as % of mean wage a US Log likelihood Loss function N Note: Dependent variable: log(yearly compensation). Standard Errors in parentheses. *, ** indicate significance at the 10% (5%) level. Tobit estimator, Panels A and B, and Honoré (1992) fixed effect estimator, Panels C and D. Other controls are share male, share white collar, share 40 to 65 year old in industry/firm, firm size, age, tenure, time trend, male, industry fixed effects. a. (p*dw/dp)/w, where p is mean risk, dw/dp is the marginal effect at the mean, and w is mean wage. The US value is from Hersch (1998).

21 w EU 3 W EU 2 EU 1 F 3 F 2 W F 1 p Figure 1. Equilibrium with three firms and three workers. F1, F2, and F3 are isoprofit lines, EU1, EU2, and EU3 are indifference curves.

22 w 3 w 2 W w 3 w 2 W w 1 W w 1 W p1 p 2 p 3 p1 p 2 p 3 Figure 2a. Industry 1 low risk Figure 2b. Industry 1 high risk Concave hedonic wage function WW w 3 W w 3 W w 2 w 2 w 1 W w 1 W p1 p 2 p 3 p1 p 2 p 3 Figure 2c. Industry 1 low risk Figure 2d. Industry 1 high risk Convex hedonic wage function WW Note: Firm 1 and firm 3 belong to industry 1, firm 2 belongs to industry 2 (consisting of just this firm). The fat ray is the locus of industry 1 risk. The industry risk differential is the slope from a line starting on the fat ray, going through (w 2, p 2 )

23 Working Papers of the Institute for Empirical Research in Economics No. 1. Rudolf Winter-Ebmer and Josef Zweimüller: Firm Size Wage Differentials in Switzerland: Evidence from Job Changers, February Bruno S. Frey and Marcel Kucher: History as Reflected in Capital Markets: The Case of World War II, February Josef Falkinger, Ernst Fehr, Simon Gächter and Rudolf Winter-Ebmer: A Simple Mechanism for the Efficient Provision of Public Goods Experimental Evidence, February Ernst Fehr and Klaus M. Schmidt: A Theory of Fairness, Competition and Cooperation, April Markus Knell: Social Comparisons, Inequality, and Growth, April Armin Falk and Urs Fischbacher: A Theory of Reciprocity, April Bruno S. Frey and Lorenz Goette: Does Pay Motivate Volunteers?, May Rudolf Winter-Ebmer and Josef Zweimüller: Intra-firm Wage Dispersion and Firm Performance, May Josef Zweimüller: Schumpeterian Entrepreneurs Meet Engel s Law: The Impact of Inequality on Innovation- Driven Growth, May Ernst Fehr and Simon Gächter: Cooperation and Punishment in Public Goods Experiments, June Rudolf Winter-Ebmer and Josef Zweimüller: Do Immigrants Displace Young Native Workers: The Austrian Experience, June Ernst Fehr and Jean-Robert Tyran: Does Money Illusion Matter?, June Stefan Felder and Reto Schleiniger: Environmental Tax Reform: Efficiency and Political Feasibility, July Bruno S. Frey: Art Fakes What Fakes?, An Economic View, July Bruno S. Frey and Alois Stutzer: Happiness, Economy and Institutions, July Urs Fischbacher, Simon Gächter and Ernst Fehr: Are People Conditionally Cooperative? Evidence from a Public Goods Experiment, July Armin Falk, Ernst Fehr and Urs Fischbacher: On the Nature of Fair Behavior, August Vital Anderhub, Simon Gächter and Manfred Königstein: Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment, August Simon Gächter and Armin Falk: Reputation or Reciprocity?, September Ernst Fehr and Klaus M. Schmidt: Fairness, Incentives, and Contractual Choices, September Urs Fischbacher: z-tree - Experimenter s Manual, September Bruno S. Frey and Alois Stutzer: Maximising Happiness?, October Alois Stutzer: Demokratieindizes für die Kantone der Schweiz, October Bruno S. Frey: Was bewirkt die Volkswirtschaftslehre?, October Bruno S. Frey, Marcel Kucher and Alois Stutzer: Outcome, Process & Power in Direct Democracy, November Bruno S. Frey and Reto Jegen: Motivation Crowding Theory: A Survey of Empirical Evidence, November Margit Osterloh and Bruno S. Frey: Motivation, Knowledge Transfer, and Organizational Forms, November Bruno S. Frey and Marcel Kucher: Managerial Power and Compensation, December Reto Schleiniger: Ecological Tax Reform with Exemptions for the Export Sector in a two Sector two Factor Model, December Jens-Ulrich Peter and Klaus Reiner Schenk-Hoppé: Business Cycle Phenomena in Overlapping Generations Economies with Stochastic Production, December Josef Zweimüller: Inequality, Redistribution, and Economic Growth, January Marc Oliver Bettzüge and Thorsten Hens: Financial Innovation, Communication and the Theory of the Firm, January Klaus Reiner Schenk-Hoppé: Is there a Golden Rule for the Stochastic Solow Growth Model? January Ernst Fehr and Simon Gächter: Do Incentive Contracts Crowd out Voluntary Cooperation? February Marc Oliver Bettzüge and Thorsten Hens: An Evolutionary Approach to Financial Innovation, July Bruno S. Frey: Does Economics Have an Effect? Towards an Economics of Economics, February Josef Zweimüller and Rudolf Winter-Ebmer: Firm-Specific Training: Consequences for Job-Mobility, March 2000 The Working Papers of the Institute for Empirical Research in Economics can be downloaded in PDF-format from Institute for Empirical Research in Economics, Blümlisalpstr. 10, 8006 Zurich, Switzerland Phone: Fax: bibiewzh@iew.unizh.ch

24 Working Papers of the Institute for Empirical Research in Economics No. 38. Martin Brown, Armin Falk and Ernst Fehr: Contract Inforcement and the Evolution of Longrun Relations, March Thorsten Hens, Jörg Laitenberger and Andreas Löffler: On Uniqueness of Equilibria in the CAPM, July Ernst Fehr and Simon Gächter: Fairness and Retaliation: The Economics of Reciprocity, March Rafael Lalive, Jan C. van Ours and Josef Zweimüller: The Impact of Active Labor Market Programs and Benefit Entitlement Rules on the Duration of Unemployment, March Reto Schleiniger: Consumption Taxes and International Competitiveness in a Keynesian World, April Ernst Fehr and Peter K. Zych: Intertemporal Choice under Habit Formation, May Ernst Fehr and Lorenz Goette: Robustness and Real Consequences of Nominal Wage Rigidity, May Ernst Fehr and Jean-Robert Tyran: Does Money Illusion Matter? REVISED VERSION, May Klaus Reiner Schenk-Hoppé: Sample-Path Stability of Non-Stationary Dynamic Economic Systems, Juni Bruno S. Frey: A Utopia? Government without Territorial Monopoly, June Bruno S. Frey: The Rise and Fall of Festivals, June Bruno S. Frey and Reto Jegen: Motivation Crowding Theory: A Survey of Empirical Evidence, REVISED VERSION, June Albrecht Ritschl and Ulrich Woitek: Did Monetary Forces Cause the Great Depression? A Bayesian VAR Analysis for the U.S. Economy, July Alois Stutzer and Rafael Lalive: The Role of Social Work Norms in Job Searching and Subjective Well-Being, July Iris Bohnet, Bruno S. Frey and Steffen Huck: More Order with Less Law: On Contract Enforcement, Trust, and Crowding, July Armin Falk and Markus Knell: Choosing the Joneses: On the Endogeneity of Reference Groups, July Klaus Reiner Schenk-Hoppé: Economic Growth and Business Cycles: A Critical Comment on Detrending Time Series, August Armin Falk, Ernst Fehr and Urs Fischbacher: Appropriating the Commons A Theoretical Explanation, September Bruno S. Frey and Reiner Eichenberger: A Proposal for a Flexible Europe, August Reiner Eichenberger and Bruno S. Frey: Europe s Eminent Economists: A Quantitative Analysis, September Bruno S. Frey: Why Economists Disregard Economic Methodology, September Armin Falk, Ernst Fehr, Urs Fischbacher: Informal Sanctions, September Rafael Lalive: Did we Overestimate the Value of Health?, October 2000 The Working Papers of the Institute for Empirical Research in Economics can be downloaded in PDF-format from Institute for Empirical Research in Economics, Blümlisalpstr. 10, 8006 Zürich, Switzerland Phone: Fax: bibiewzh@iew.unizh.ch