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Abstract
This paper utilizes the theory of compensating differentials for job risks from the labor
economics literature to evaluate farmers’ differences in wage-risk tradeoffs. In the
context of job risks, the theory predicts that farmers who place a lower value on health
status are willing to work for lower compensation on a risky job. The aim of the paper is
to evaluate how the observed wage-risk tradeoff is affected by individual heterogeneity in
risk preferences, by acknowledging variations in farmers’ revealed attitudes toward risk,
both in job-related and non-job activities. The job risk measure employed is self-reported
job risk of low back pain, the most recurring health risk faced by farmers. The job-related
risky activity is the application of hazardous agrochemicals. The non-job activity is
smoking. The primary finding of the study is that individual heterogeneity in risk
attitudes is an important determinant of the risk premium workers receive, i.e., individual
differences in other health-related activities are influential determinants of the observed
wage-risk tradeoff.
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