Compensating differentials for the risk of reinjury – lessons from professional boxing

Compensating differentials research has found that different groups of workers receive different levels of compensation for facing similar levels of workplace accident risk. A neglected area in this literature is how wages compensate workers for the risk of reinjury. This paper hypothesizes that risk of mild Traumatic Brain Injury (mTBI) reinjury earns a higher wage premium than the risk of a first mTBI. Using a new, unbalanced panel of professional boxers, individuals that are less risk averse than the average worker, it finds that their purses price for the risk of knockout reinjury while boxers that have never lost by knockout earn economically and statistically insignificant knockout-risk premiums. These results are consistent across three measures of previous knockout loss and three robustness tests. They also imply that current values of a statistical injury (VSI) underestimate the willingness to pay for safety by workers that have sustained a past injury.