Risk Premium for Loss of Employment in Polish Regions

Abstract

On the basis of the income-based valuation method of intellectual capital of the region in the previous papers, the author discovers a need for a valuation of the risk premium which should be included in the rate that discounts income from work. Undoubtedly, both the loss of employment and the amount of income from work contribute to the intuitive calculation in the economic migration. The income-based valuation of the right to a certain sequence of income at a certain risk level properly integrates these factors as one value, providing a clear criterion of selection. Due to the fact that the labour market does not generate the values that allow the adaptation of the CAPM model, there was offered the original method of the risk premium valuation which provides the results analogous to those based on the CAPM model, and it was applied for the particular provinces in Poland. As a result, there was revealed the equity premium puzzle of the Polish labour market. Because of the significant amount of estimates, the obtained results are the first step towards the problem.