Abstract
The standard treatment of occupational risk in the labour market is conducted in terms of the theory of compensating wage differentials, the basic characteristic of which is that workers can fully estimate actual occupational risks. However, research in cognitive psychology, and recent advances in economic psychology, suggest that individuals consistently underestimate risks associated with accidents. In this paper, we discuss the case when the workers systematically underestimate job risks. After presenting the standard treatment of occupational risks, and of health and safety at work regulation, we then proceed to incorporate the idea of job risk underestimation. The paper discusses the types and impact of regulation on health and safety effort in a simple framework in which workers’ beliefs concerning accident risks also play a role. The paper shows that a particular type of regulatory intervention is necessary for the risk underestimating workers not to suffer a welfare loss.
| Original language | English |
|---|---|
| Pages (from-to) | 641-656 |
| Number of pages | 16 |
| Journal | European Journal of Law and Economics |
| Volume | 41 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 1 Jun 2016 |
Bibliographical note
Funding Information:The financial support of the European Commission under the Seventh Framework Programme, Theme HEALTH-2007-4.2-3 (Grant agreement no.: 200716) is gratefully acknowledged. The authors are also grateful to the anonymous referees of this journal for their very helpful comments.
Publisher Copyright:
© 2012, Springer Science+Business Media New York.
Keywords
- Health and safety regulation
- Job risks
- Types of regulation