Labor Economics 5th Edition by George Borjas

Exercise 17

U.S. Trucking pays its drivers $40,000 per year, while American Trucking pays its drivers $38,000 per year. For both firms, truck drivers average 240,000 miles per year. Truck driving jobs are the same regardless of which firm one works for, except that U.S. Trucking gives each of its trucks a safety inspection ever 50,000 miles while American Trucking gives each of its trucks a safety inspection every 36,000 miles. This difference in safety inspection rates results in a different rate of fatal accidents between the two companies. In particular, one driver for U.S Trucking dies in an accident every 12 million miles while one driver for American Trucking dies in an accident every 15 million miles. What is the value of a trucker's life implied by the compensating differential between the two firms