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Abstract

I show that workers do not fully grasp the fatality risks of their jobs at first, but seem to eventually learn about them through work experience. Using Brazilian data, I show that a dire signal about these occupational hazards---the death of a coworker in a work-related accident---precipitates an unusual number of quits, which is consistent with a strong update in their assessment of risk. This update indicates that workers' perceptions are pliable, and thus potentially differ significantly from an objective assessment of a job's fatality risk. Moreover, the quitting reaction suggests that workers learn on-the-job, because it is exclusive to those with relatively low tenure. As workers choose their jobs, the difference between objective assessment and perceptions of fatality risk is also systematic, so employed people tend to be relatively optimistic about the risks they face, on average. Therefore, the valuation of fatality risks that does not account for uncertainty will be biased if it relies on objective measures of risk to proxy for unobserved workers' perceptions. This bias may be substantial, as my results suggest that the willingness to pay for a marginal decrease in fatality risk is underestimated by about 33%.

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