Hazardous agrochemicals, smoking, and farmers’ differences in wage-risk tradeoffs

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 and the non-job activity is smoking. The study supports the finding 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.