Wednesday, February 15, 2006

Put on your policy hat!

Here are the basics of a policy problem that I am working on. It will give you a glimpse of the "dirty" work that goes into framing a policy, and lets you go beyond the government versus market debate.

Low-skilled workers often encounter injuries in the workplace. The effects of it could be debilitating for the worker and his family because of their low assets and high vulnerability to income-shocks. Low-skilled jobs are often high-risk jobs. Would you put the onus of safety (and consequent penalty) on the employer? Should the penalty and payments be decided through regulations issued by the state or through litigiation by the plaintiff who suffers the injury? Wouldn't the shift of responsibility from the worker to the employer make the worker more careless? Moreover risk can never be made zero and there is a cost to mitigating risk. If you have a high penalty for empoyers wouldn't entrepreneurship and consequent job-creation suffer? If you go by the logic that workers will choose jobs according to their risk-preference, does the market for risk communication really work so well?

Think about it. What could be an optimal policy solution?

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