Dynamic Aggregation of Wages and Job Risk: A Case Study of Pakistan

Abstract

This study examines the relationship between job risk and wages in Pakistan using data on fatal and non-fatal occupational injuries. By employing the Hedonic Wage Function (HWF), the study estimates the Value of Statistical Life (VSL) for Pakistan. Additionally, the Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) techniques are used to analyze the wage-risk nexus dynamics and estimate the VSL from 1990 to 2019. The results reveal a positive relationship between job risk and wages, suggesting that workers in Pakistan are compensated for the risks associated with their jobs. Furthermore, the VSL estimated in this study is higher than in previous studies, indicating that workers in Pakistan value their safety more and are willing to pay more to reduce their risk of occupational injury. These findings confirm the hypothesis of Compensating Wage Differential (CWD) for Pakistan and underscore the importance of developing efficient occupational safety and health systems to protect workers and promote economic growth.