Isabel can work as a rodeo clown, where the probability of being killed in a work-related accident is 5/10,000, or she can earn work as a sword swallower, where the probability of being killed in a work-related accident is 3/10,000

Using the compensating differential approach, the value of Isabel's life is $5 million. How much more per year will working as a rodeo clown pay than working as a sword swallower?


Additional pay = $5 million [(5/10,000 ) - (3/10,000 )] = $5 million × (2/10,000 ) = $1,000.

Economics

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