Using the compensating differential approach, the value of a life is calculated as
A) the compensating differential multiplied by the increased chance of death.
B) the sum of the compensating differential and the increased chance of death.
C) the compensating differential divided by the increased chance of death.
D) the difference between the compensating differential and the increased chance of death.

Question

Quizplus · Accepted Answer

The compensating differential approach calculates the value of a life by dividing the compensating differential (additional wage paid for riskier jobs) by the increased chance of death associated with the job. This ratio reflects how much individuals require to be compensated for an increased risk of mortality, thereby estimating the value of a statistical life.

Using the Compensating Differential Approach, the Value of a Life