ECO 353-The following equation relates the natural log of wages
Question # 00542425
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Updated on: 06/08/2017 05:34 AM Due on: 06/08/2017
The following equation relates the natural log of wages, W, to risk, R, and a vector of covariates, X:
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.
What would an individual worker need to be paid to be willing to incur this 1 in 3,000 increased risk of death (ie what’s the wage premium)?
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Solution: ECO 353-The following equation relates the natural log of wages