Self Selection Bias in the Estimates of Compensating Differentials for Job Risks in India

This study contributes to the hedonic wage literature in developing countries by estimating the collective willingness to pay of a statistical life/injury, using an original data set from the Indian labor market. As self-selection by workers results in biased estimates of the wage premium for job risks, the study uses a modified selectivity bias correction technique. Empirical results indicate substantial heterogeneity in returns to risk. The estimated value of life without selectivity bias is Rs. 56 million (US $3 million), which is substantially larger than the value with selection bias. The estimates provided by the study can aid policy makers, international agencies and other researchers in evaluating health projects in India and other developing countries.