Suppose all workers have the same preferences represented by

where w is the wage and x is the proportion of the firm's air that is composed of toxic pollutants. There are only two types of jobs in the economy, a clean job (x = 0) and a dirty job (x = 1). Let w0 be the wage paid by the clean job and w1 be the wage paid for doing the dirty job. If the clean job pays $16 per hour, what is the wage in dirty jobs? What is the compensating wage differential?

Transcribed Image Text:

U=w-2x,