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Life-Cycle Consumption and the Age-Adjusted Value of Life

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  • Kniesner Thomas J

    ()
    (Syracuse University)

  • Viscusi W. Kip

    ()
    (Harvard University)

  • Ziliak James P

    ()
    (University of Kentucky)

Abstract

Our research presents new evidence on the age pattern of the implicit value of life revealed from workers' differential wages and job safety pairings. Although aging reduces the number of years of life expectancy, aging can affect the value of life through an effect on planned life-cycle consumption. The elderly could, a priori, have the highest implicit value of life if there is a life-cycle plan to defer consumption until old age. We find that largely due to the age pattern of consumption, which is non-constant, the implicit value of life rises and falls over the lifetime in a way that the value for the elderly is higher than the average over all ages or for the young. There are important health policy implications of our empirical results. Because there may be age-specific benefits of programs to save statistical lives, instead of valuing the lives of the elderly at less than the young, health policymakers should more correctly value the lives of the elderly at as much as twice the young because of relatively greater consumption lost when accidental death occurs.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 5 (2006)
Issue (Month): 1 (January)
Pages: 1-36

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Handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:4

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  1. repec:reg:wpaper:282 is not listed on IDEAS
  2. Viscusi, W Kip & Aldy, Joseph E, 2003. " The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, Springer, vol. 27(1), pages 5-76, August.
  3. Sherwin Rosen, . "The Value of Changes in Life Expectancy," University of Chicago - Population Research Center, Chicago - Population Research Center 87-14, Chicago - Population Research Center.
  4. Kevin Lang & Sumon Majumdar, 2003. "The Pricing of Job Characteristics When Markets Do Not Clear: Theory and Implications," NBER Working Papers 9911, National Bureau of Economic Research, Inc.
  5. Johannesson, Magnus & Johansson, Per-Olov & Lofgren, Karl-Gustaf, 1997. "On the Value of Changes in Life Expectancy: Blips versus Parametric Changes," Journal of Risk and Uncertainty, Springer, Springer, vol. 15(3), pages 221-39, December.
  6. W. Kip Viscusi, 2004. "The Value of Life: Estimates with Risks by Occupation and Industry," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 42(1), pages 29-48, January.
  7. Johansson, Per-Olov, 2002. " On the Definition and Age-Dependency of the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, Springer, vol. 25(3), pages 251-63, November.
  8. repec:reg:rpubli:282 is not listed on IDEAS
  9. Arthur, W B, 1981. "The Economics of Risks to Life," American Economic Review, American Economic Association, American Economic Association, vol. 71(1), pages 54-64, March.
  10. Garen, John, 1988. "Compensating Wage Differentials and the Endogeneity of Job Riskiness," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 9-16, February.
  11. Johansson, Per-Olov, 2001. "Is there a meaningful definition of the value of a statistical life?," Journal of Health Economics, Elsevier, Elsevier, vol. 20(1), pages 131-139, January.
  12. Bruce D. Meyer & James X. Sullivan, 2003. "Measuring the Well-Being of the Poor Using Income and Consumption," NBER Working Papers 9760, National Bureau of Economic Research, Inc.
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