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Roy Model Sorting And Nonrandom Selection In The Valuation Of A Statistical Life

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  • Thomas DeLeire
  • Shakeeb Khan
  • Christopher Timmins

Abstract

Wage-hedonics is used to recover the value of a statistical life by exploiting the fact that workers choosing riskier occupations will be compensated with a higher wage. However, Roy (1951) suggests that observed wage distributions will be distorted if individuals select into jobs according to idiosyncratic returns. We illustrate how this type of sorting may bias wage-hedonic VSL estimates and describe two estimators that correct for it. Using data from the CPS, we recover VSL estimates that are three to four times larger than those based on the traditional techniques, statistically significant, and robust to a wide array of specifications.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 54 (2013)
Issue (Month): 1 (02)
Pages: 279-306

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Handle: RePEc:wly:iecrev:v:54:y:2013:i:1:p:279-306

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References

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  1. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2006. "Pinning Down the Value of Statistical Life," Center for Policy Research Working Papers 85, Center for Policy Research, Maxwell School, Syracuse University.
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  5. Jahn K. Hakes & W. Kip Viscusi, 2007. "Automobile Seatbelt Usage and the Value of Statistical Life," Southern Economic Journal, Southern Economic Association, vol. 73(3), pages 659–676, January.
  6. Portney, Paul R., 1981. "Housing prices, health effects, and valuing reductions in risk of death," Journal of Environmental Economics and Management, Elsevier, vol. 8(1), pages 72-78, March.
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  9. Patrick Bayer & Shakeeb Khan & Christopher Timmins, 2008. "Nonparametric Identification and Estimation in a Generalized Roy Model," NBER Working Papers 13949, National Bureau of Economic Research, Inc.
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  13. Revesz, Richard L., 1999. "Environmental Regulation, Cost-Benefit Analysis, and the Discounting of Human Lives," Berkeley Olin Program in Law & Economics, Working Paper Series qt57q8284f, Berkeley Olin Program in Law & Economics.
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  16. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-18, May.
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Cited by:
  1. Shanjun Li, 2012. "Traffic safety and vehicle choice: quantifying the effects of the ‘arms race’ on American roads," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(1), pages 34-62, 01.
  2. Hammitt, James & Roman, Henry & Stieb, David & Walsh, Tyra, 2012. "Expert Elicitation of the Value per Statistical Life in an Air Pollution Context," TSE Working Papers 12-290, Toulouse School of Economics (TSE).
  3. Joshua Graff Zivin & Matthew Neidell, 2013. "Environment, Health, and Human Capital," NBER Working Papers 18935, National Bureau of Economic Research, Inc.
  4. 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.

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