Hedonic Wage Equilibrium: Theory, Evidence and Policy * We examine theoretically and empirically ... more Hedonic Wage Equilibrium: Theory, Evidence and Policy * We examine theoretically and empirically the properties of the equilibrium wage function and its implications for policy. Our emphasis is on how the researcher approaches economic and policy questions when there is labor market heterogeneity leading to a set of wages. We focus on the application where hedonic models have been most successful at clarifying policy relevant outcomes and policy effects, that of the wage premia for fatal injury risk. Estimates of the overall hedonic locus we discuss imply the so-called value of a statistical life (VSL) that is useful as the benefit value in a cost-effectiveness calculation of government programs to enhance personal safety. Additional econometric results described are the multiple dimensions of heterogeneity in VSL, including by age and consumption plans, the latent trait that affects wages and job safety setting choice, and family income. Simulations of hedonic market outcomes are also valuable research tools. To demonstrate the additional usefulness of giving detail to the underlying structure we not only develop the issue of welfare comparisons theoretically but also illustrate how numerical simulations of the underlying structure can also be informative. Using a reasonable set of primitives we see that job safety regulations are much more limited in their potential for improving workplace safety efficiently compared to mandatory injury insurance with experience rated premiums. The simulations reveal how regulations incent some workers to take more dangerous jobs, while workers' compensation insurance does not (or less so).
In response to growing concerns about understanding the impact of regulation on consumers, busine... more In response to growing concerns about understanding the impact of regulation on consumers, business, and government, the American Enterprise Institute and the Brookings Institution have established the AEI-Brookings Joint Center for Regulatory Studies. The primary purpose of the center is to hold lawmakers and regulators more accountable by providing thoughtful, objective analysis of existing regulatory programs and new regulatory proposals. The Joint Center builds on AEI's and Brookings's impressive body of work over the past three decades that has evaluated the economic impact of regulation and offered constructive suggestions for implementing reforms to enhance productivity and consumer welfare. The views in Joint Center publications are those of the authors and do not necessarily reflect the views of the staff, council of academic advisers, or fellows.
Using a computable hedonic equilibrium model of the labor market, we numerically simulate the int... more Using a computable hedonic equilibrium model of the labor market, we numerically simulate the interactions between workers and firms as tempered by the state and federal regulations intended to influence workplace safety. We compute the changes needed for OSHA to become economically meaningful and determine the impact on safety from further expanding the experience rating of workers' compensation insurance premiums. Most importantly, we show how numerical simulation can serve as a complementary research tool to econometric models. Simulation is well suited for studying extreme policy changes and locating structural conditions pivotal in determining economic outcomes.
This entry explicates how market forces incent managers to be concerned with worker health and sa... more This entry explicates how market forces incent managers to be concerned with worker health and safety. It also notes how supplementing market forces are government actions intended to improve work-related health and safety. These include the legal system under tort laws, states’ workers’ compensation insurance Programs, research into the causes of health hazards at the National Institute of Occupational Safety and Health (NIOSH), and the federal government’s workplace regulations under the Occupational Safety and Health Act (OSHA). An important empirical conclusion emerging is that the labor market, via the additional compensation workers require for exposure to health and safety risks, provides the largest economic incentive for managers making workplace decisions involving worker health-related well being.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
Public reporting burden for the collection of information is estimated to average 1 hour per resp... more Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number.
The need to pre-specify expected interactions between variables is an issue in multiple regressio... more The need to pre-specify expected interactions between variables is an issue in multiple regression. Theoretical and practical considerations make it impossible to pre-specify all possible interactions. The functional form of the dependent variable on the predictors is unknown in many cases. Two ways are described in which the data mining technique Multivariate Adaptive Regression Splines (MARS) can be utilized: first, to obtain possible improvements in model specification, and second, to test for the robustness of findings from a regression analysis. An empirical illustration is provided to show how MARS can be used for both purposes.
When OSHA was established, proponents believed it would dramatically improve the safety and healt... more When OSHA was established, proponents believed it would dramatically improve the safety and health of American workers. During the forty years of its existence, workplace fatalities and nonfatal injuries and illnesses have fallen but OSHA is not the major cause of this decline. Changes in the industrial mix of workers and improvements in safety technology have combined with expanded employer incentives unrelated to OSHA to decrease worker injuries and illnesses. The financial incentives for employers to expand expenditures on worker safety and health created by the labor market, states' workers' compensation insurance programs, and the legal system swamp the meager incentives created by OSHA. This survey examines OSHA in light of the other forces affecting workplace safety in the United States to generate a set of policy recommendations for how it can best use its limited resources to improve * I would like to thank the Mercatus Center at George Mason University for financial support, Keith Teltser for his excellent research assistance, and Richard Williams, Jerry Ellig, and two anonymous reviewers for their helpful comments on an earlier draft. I am solely responsible for all remaining errors and omissions.
SEPARATING THE REPORTING EFFECTS FROM THE INJURY ... is valuable be-cause the key labor market ef... more SEPARATING THE REPORTING EFFECTS FROM THE INJURY ... is valuable be-cause the key labor market effects of WC, including the effects of benefit ... NII); a moderate injury that somewhat reduces earning capacity, hereafter referred to as a permanent partial disability (PPD ...
Hedonic Wage Equilibrium: Theory, Evidence and Policy * We examine theoretically and empirically ... more Hedonic Wage Equilibrium: Theory, Evidence and Policy * We examine theoretically and empirically the properties of the equilibrium wage function and its implications for policy. Our emphasis is on how the researcher approaches economic and policy questions when there is labor market heterogeneity leading to a set of wages. We focus on the application where hedonic models have been most successful at clarifying policy relevant outcomes and policy effects, that of the wage premia for fatal injury risk. Estimates of the overall hedonic locus we discuss imply the so-called value of a statistical life (VSL) that is useful as the benefit value in a cost-effectiveness calculation of government programs to enhance personal safety. Additional econometric results described are the multiple dimensions of heterogeneity in VSL, including by age and consumption plans, the latent trait that affects wages and job safety setting choice, and family income. Simulations of hedonic market outcomes are also valuable research tools. To demonstrate the additional usefulness of giving detail to the underlying structure we not only develop the issue of welfare comparisons theoretically but also illustrate how numerical simulations of the underlying structure can also be informative. Using a reasonable set of primitives we see that job safety regulations are much more limited in their potential for improving workplace safety efficiently compared to mandatory injury insurance with experience rated premiums. The simulations reveal how regulations incent some workers to take more dangerous jobs, while workers' compensation insurance does not (or less so).
In response to growing concerns about understanding the impact of regulation on consumers, busine... more In response to growing concerns about understanding the impact of regulation on consumers, business, and government, the American Enterprise Institute and the Brookings Institution have established the AEI-Brookings Joint Center for Regulatory Studies. The primary purpose of the center is to hold lawmakers and regulators more accountable by providing thoughtful, objective analysis of existing regulatory programs and new regulatory proposals. The Joint Center builds on AEI's and Brookings's impressive body of work over the past three decades that has evaluated the economic impact of regulation and offered constructive suggestions for implementing reforms to enhance productivity and consumer welfare. The views in Joint Center publications are those of the authors and do not necessarily reflect the views of the staff, council of academic advisers, or fellows.
Using a computable hedonic equilibrium model of the labor market, we numerically simulate the int... more Using a computable hedonic equilibrium model of the labor market, we numerically simulate the interactions between workers and firms as tempered by the state and federal regulations intended to influence workplace safety. We compute the changes needed for OSHA to become economically meaningful and determine the impact on safety from further expanding the experience rating of workers' compensation insurance premiums. Most importantly, we show how numerical simulation can serve as a complementary research tool to econometric models. Simulation is well suited for studying extreme policy changes and locating structural conditions pivotal in determining economic outcomes.
This entry explicates how market forces incent managers to be concerned with worker health and sa... more This entry explicates how market forces incent managers to be concerned with worker health and safety. It also notes how supplementing market forces are government actions intended to improve work-related health and safety. These include the legal system under tort laws, states’ workers’ compensation insurance Programs, research into the causes of health hazards at the National Institute of Occupational Safety and Health (NIOSH), and the federal government’s workplace regulations under the Occupational Safety and Health Act (OSHA). An important empirical conclusion emerging is that the labor market, via the additional compensation workers require for exposure to health and safety risks, provides the largest economic incentive for managers making workplace decisions involving worker health-related well being.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
Public reporting burden for the collection of information is estimated to average 1 hour per resp... more Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number.
The need to pre-specify expected interactions between variables is an issue in multiple regressio... more The need to pre-specify expected interactions between variables is an issue in multiple regression. Theoretical and practical considerations make it impossible to pre-specify all possible interactions. The functional form of the dependent variable on the predictors is unknown in many cases. Two ways are described in which the data mining technique Multivariate Adaptive Regression Splines (MARS) can be utilized: first, to obtain possible improvements in model specification, and second, to test for the robustness of findings from a regression analysis. An empirical illustration is provided to show how MARS can be used for both purposes.
When OSHA was established, proponents believed it would dramatically improve the safety and healt... more When OSHA was established, proponents believed it would dramatically improve the safety and health of American workers. During the forty years of its existence, workplace fatalities and nonfatal injuries and illnesses have fallen but OSHA is not the major cause of this decline. Changes in the industrial mix of workers and improvements in safety technology have combined with expanded employer incentives unrelated to OSHA to decrease worker injuries and illnesses. The financial incentives for employers to expand expenditures on worker safety and health created by the labor market, states' workers' compensation insurance programs, and the legal system swamp the meager incentives created by OSHA. This survey examines OSHA in light of the other forces affecting workplace safety in the United States to generate a set of policy recommendations for how it can best use its limited resources to improve * I would like to thank the Mercatus Center at George Mason University for financial support, Keith Teltser for his excellent research assistance, and Richard Williams, Jerry Ellig, and two anonymous reviewers for their helpful comments on an earlier draft. I am solely responsible for all remaining errors and omissions.
SEPARATING THE REPORTING EFFECTS FROM THE INJURY ... is valuable be-cause the key labor market ef... more SEPARATING THE REPORTING EFFECTS FROM THE INJURY ... is valuable be-cause the key labor market effects of WC, including the effects of benefit ... NII); a moderate injury that somewhat reduces earning capacity, hereafter referred to as a permanent partial disability (PPD ...
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