Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 19

Suppose that Bill is currently working as a high school math teacher, where his likelihood of dying on the job is 5 in 100,000. (In other words, the probability that he will be killed on the job this year is 0.00005.) Bill leaves his school job for a career as a professional magician, where his likelihood of dying on the job is 50 in 100,000 (or 0.00050). Bill earned $30,000 per year as a teacher, and he earns $40,000 as a magician. Use the compensating differential method to determine how much Bill implicitly values his life.