Estimation of wage differential for the Czech Republic : Hedonic wage model testing on three datasets

The aim of the paper is to test hedonic wage model on data from the Czech labour market in order to obtain the Value of a Statistical Life from wage differential. In order to support an empirical basis for using the willingness-to-accept concept as a reliable method, we also examine the statistical relationship between changes in occupational rate of fatal risks and yearly average wages for economic sectors. We confirm statistically significant effect of objective fatal risk rate on employee’s wage for the Czech Republic. Using individual data from the national representative survey conducted in October 2006, we estimate the VSL about 6 million €, while we display higher VSL for the employees exposed to higher occupational risks, particularly for exposed males. We do not confirm significant effect of either objective fatal risks or subjective perception of occupational risk on wage for individual data coming from the 2000 survey. Wage differential is obtained from statistical averages for economic sectors during 2003-2005 that also gives us empirical basis for using the willingness-to-pay concept as a reliable method for valuing a life. The VSL derived from macro data, i.e. statistical averages, then ranges between 3.2 to 3.6 million €. The VSL’s derived from hedonic wage models are pretty much comparable with the VSL obtained from a CV study on willingness to accept compensation paid through higher wage for increased risk rate by 50% as well as they are in line with empirical evidence provided by the literature. The VSL’s derived from the Czech labor market are, however, proved to be larger than the VSL’s obtained outside of labor market that are about 0.2 to 1.0 million €.