Differences in Subjective Risk Thresholds: Worker Groups as an Example
Management Science · 1998 · Volume 44 · Issue 6
Abstract
Subjective risk perceptions are often encoded as responses to 0-1 questions in surveys or other qualitative risk scales. However, reference points for assessing an activity as risky are confounded by various characteristics of the respondents. This paper uses a sample of workers for whom quantitative risk assessments as well as dichotomous risk perception responses are available. It is shown that, given a quantitative risk measure, the thresholds for assessing an activity as “risky” vary systematically, particularly by education. The differences in such thresholds across worker groups are estimated. The resulting implications of using qualitative risk variables for assessing wage-risk tradeoffs are estimated, yielding results that are also relevant for many other areas involving similar qualitative variables.
Keywords
Risk Perceptions, Risk Thresholds, Risk Premiums, Dichotomous Variables
Enable JavaScript for citation tools and additional paper interactions.