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Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions

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  • Thomas Kniesner

    ()

  • W. Viscusi
  • James Ziliak

Abstract

We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cut-off for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably cross the labor force. Our results reconcile the previous discrepancies betweenhedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.

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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 40 (2010)
Issue (Month): 1 (February)
Pages: 15-31

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Handle: RePEc:kap:jrisku:v:40:y:2010:i:1:p:15-31

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Web page: http://www.springerlink.com/link.asp?id=100299

Related research

Keywords: Value of statistical life; VSL; Quantile regression; Panel data; Fixed effects; PSID; Fatality risk; CFOI; JEL Classification ; C23; I10; J17; J28; K00;

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References

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  1. Dan A. Black & Thomas K. Kniesner, 2003. "On the Measurement of Job Risk in Hedonic Wage Models," NCEE Working Paper Series 200306, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2003.
  2. Craig A. Olson, 1981. "An Analysis of Wage Differentials Received by Workers on Dangerous Jobs," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 167-185.
  3. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2012. "The Value of a Statistical Life: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 74-87, February.
  4. Eeckhoudt, Louis R & Hammitt, James K, 2001. " Background Risks and the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 261-79, November.
  5. Raj Chetty, 2009. "The Simple Economics of Salience and Taxation," NBER Working Papers 15246, National Bureau of Economic Research, Inc.
  6. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-44, October.
  7. Louis Kaplow, 2003. "The Value of a Statistical Life and the Coefficient of Relative Risk Aversion," NBER Working Papers 9852, National Bureau of Economic Research, Inc.
  8. Mary Evans & V. Smith, 2010. "Measuring how risk tradeoffs adjust with income," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 33-55, February.
  9. Thomas J. Kniesner & James P. Ziliak, 2000. "Tax Reform and Automatic Stabilization," Center for Policy Research Working Papers 21, Center for Policy Research, Maxwell School, Syracuse University.
  10. Raj Chetty, 2006. "A New Method of Estimating Risk Aversion," American Economic Review, American Economic Association, vol. 96(5), pages 1821-1834, December.
  11. Ziliak, James P., 1998. "Does the choice of consumption measure matter? An application to the permanent-income hypothesis," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 201-216, February.
  12. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June.
  13. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
  14. Joseph E. Aldy & W. Kip Viscusi, 2008. "Adjusting the Value of a Statistical Life for Age and Cohort Effects," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 573-581, August.
  15. 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, vol. 27(1), pages 5-76, August.
  16. Graham, John D., 2008. "Saving Lives Through Administrative Law and Economics," Working paper 299, Regulation2point0.
  17. W. Kip Viscusi, 2004. "The Value of Life: Estimates with Risks by Occupation and Industry," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 29-48, January.
  18. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
  19. Rachel Baker & Susan Chilton & Michael Jones-Lee & Hugh Metcalf, 2008. "Valuing lives equally: Defensible premise or unwarranted compromise?," Journal of Risk and Uncertainty, Springer, vol. 36(2), pages 125-138, April.
  20. James P. Ziliak & Thomas J. Kniesner, 1998. "The Importance of Sample Attrition in Life Cycle Labor Supply Estimation," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 507-530.
  21. W. Viscusi, 2009. "Valuing risks of death from terrorism and natural disasters," Journal of Risk and Uncertainty, Springer, vol. 38(3), pages 191-213, June.
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Citations

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Cited by:
  1. Polat, Sezgin, 2013. "Wage Compensation for Risk: The Case of Turkey," GIAM Working Papers 13-11, Galatasaray University Economic Research Center.
  2. Doucouliagos, Hristos & Stanley, T.D. & Viscusi, W. Kip, 2014. "Publication selection and the income elasticity of the value of a statistical life," Journal of Health Economics, Elsevier, vol. 33(C), pages 67-75.
  3. Friedson, Andrew I. & Kniesner, Thomas J., 2011. "Losers and Losers: Some Demographics of Medical Malpractice Tort Reforms," IZA Discussion Papers 5921, Institute for the Study of Labor (IZA).
  4. Vincenzo Carrieri & Edoardo Di Porto & Leandro Elia, 2011. "Risky jobs and wage differentials An indirect test for segregation," Working Papers 144, University of Rome La Sapienza, Department of Public Economics.
  5. Cameron, Trudy Ann & DeShazo, J.R., 2013. "Demand for health risk reductions," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 87-109.
  6. Guardado, José R. & Ziebarth, Nicolas R., 2013. "A Model of Worker Investment in Safety and Its Effects on Accidents and Wages," IZA Discussion Papers 7428, Institute for the Study of Labor (IZA).
  7. Doucouliagos, Chris & Stanley, T.D. & Giles, Margaret, 2012. "Are estimates of the value of a statistical life exaggerated?," Journal of Health Economics, Elsevier, vol. 31(1), pages 197-206.
  8. Dennis Guignet & Anna Alberini, 2013. "Can Property Values Capture Changes in Environmental Health Risks? Evidence from a Stated Preference Study in Italy and the UK," Working Papers 2013.67, Fondazione Eni Enrico Mattei.
  9. W. Viscusi, 2010. "The heterogeneity of the value of statistical life: Introduction and overview," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 1-13, February.
  10. Jonathan M. Lee & Laura O. Taylor, 2014. "Randomized Safety Inspections And Risk Exposure On The Job: Quasi-Experimental Estimates Of The Value Of A Statistical Life," Working Papers 14-05, Center for Economic Studies, U.S. Census Bureau.
  11. Ziebarth, Nicolas R. & Schmitt, Maike & Karlsson, Martin, 2013. "The Short-Term Population Health Effects of Weather and Pollution: Implications of Climate Change," IZA Discussion Papers 7875, Institute for the Study of Labor (IZA).

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