Knowledge that Transforms

Taylor's series and logarithmic estimates of health state-dependent utility functions both imply that job injuries reduce one's utility and marginal utility of income, thus rejecting the monetary loss equivalent formulation. Injury valuations have unitary income elasticity, and the valuation of non-incremental risk changes and effects of base risks follow economic predictions.

This paper contrasts the dynamic properties of an imperfectly competitive economy with a representative agent, real business cycle model. For both economies, inventories are the important dynamic linkage. The predictions of these models with regards to the comovement of employment across sectors may differ. Empirical evidence on the comovement of employment over the business cycle is consistent with the model of imperfect competition with inventory holdings.