Offer wage function

The offer wage function through represents lower profits than the offer wage function tangent to (0i>02>. The expansion in safety via OSHA s direct effect reduces firm profitability — the wage decrease does not compensate for the increase in safety expenses. 

Also included in Table 3-2 are the acceptance wage function for the most risk-averse (a = 0.98) and the least risk-averse (a = 0.96) workers and the offer wage function for firms with the most productive (p = 1) and least productive (p = 0.1) safety equipment. Acceptance and offer wage functions represent the monetized value of the indifference and isoprofit curves in wage/risk space. We derived asking and offer wages using the level of utility or profit for a completely safe... 

Acceptance Wage s the shadow value of the iso-utility function for workers with risk aversion given by a particular value of a and tc = 0. Offer Wage = the iso-profit function value for firms with safety productivity given by a particular value of p and 7i = 0. 

In a medical system where the reimbursement rate is set above the actual cost of drugs while reimbursement rates for physicians services, which are also set by the MHW, are set below cost (344), doctors and hospitals have depended on the sale of pharmaceuticals to make money. Profits from drug sales made up about 37 percent of the independent doctor s wages in 1987 (344). Since the Japanese health system offers few additional subsidies (outside the doctor s salaries or fees) to help clinics and private hospitals purchase equipment or maintain facilities, the sale of pharmaceuticals has become a primary source of revenue to ensure the normal functioning of nongovernmental medical facilities. With no formal method to keep track of physicians prescription habits,44 the incentive is strong for doctors to prescribe unnecessary and excessive medications (139, 163,344). 

In summary, the basic model predicts that inherently more dangerous occupations will have to offer higher wage rates to attract workers. High risk-high wage occupations will optimally coexist with low wage-low risk occupations. Workers will choose between occupations based on their preferences for risk and income. If workers correctly choose the industry that reflects their preferences then the labor market will have functioned correctly. 

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