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Using Job Changes to Evaluate the Bias of the Value of a Statistical Life

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  • Hannes Spengler
  • Sandra Schaffner

Abstract

This paper presents a new approach to obtain unbiased estimates of the value of a statistical life (VSL) with labor market data. Investigating job changes, we combine the advantages of recent panel studies, which allow to control for unobserved heterogeneity of workers, and conventional cross-sectional estimations, which primarily exploit the variation of wage and risk between different jobs. We find a VSL of 6.1 million euros from pooled cross-sectional estimation, 1.9 million euros from the static first-differences panel model and 3.5 million euros from the job-changer specification. Thus, ignoring individual heterogeneity causes overestimates of the VSL, whereas identifying the wage-risk tradeoff not only by means of between job variation (job-changer model) but also on the basis of noisy variation on the job (panel models) may lead to underestimates of the VSL. Our results can be used to perform cost-benefit analyses of public projects aimed at reducing fatality risks, e.g., in the domains of health, environmental or traffic policy.

Suggested Citation

  • Hannes Spengler & Sandra Schaffner, 2007. "Using Job Changes to Evaluate the Bias of the Value of a Statistical Life," Discussion Papers of DIW Berlin 713, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp713
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    References listed on IDEAS

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    1. Spengler, Hannes, 2004. "Kompensatorische Lohndifferenziale und der Wert eines statistischen Lebens in Deutschland," Darmstadt Discussion Papers in Economics 133, Darmstadt University of Technology, Department of Law and Economics.
    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, vol. 27(1), pages 5-76, August.
    3. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-1946, December.
    4. 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.
    5. Spengler, Hannes, 2004. "Kompensatorische Lohndifferenziale und der Wert eines statistischen Lebens in Deutschland," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 37281, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    6. Sandra Schaffner & Hannes Spengler, 2005. "Der Einfluss unbeobachteter Heterogenität auf kompensatorische Lohndifferentiale und den Wert eines statistischen Lebens: eine mikroökonometrische Parallelanalyse mit IABS und SOEP," Discussion Papers of DIW Berlin 539, DIW Berlin, German Institute for Economic Research.
    7. Jason F. Shogren & Tommy Stamland, 2002. "Skill and the Value of Life," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1168-1197, October.
    8. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    9. repec:reg:rpubli:282 is not listed on IDEAS
    10. Spengler, Hannes, 2009. "Kompensatorische Lohndifferenziale und der Wert eines statistischen Lebens in Deutschland," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 77423, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    11. Shogren, Jason F. & Stamland, Tommy, 2006. "Consistent estimation of the value of statistical life," Resource and Energy Economics, Elsevier, vol. 28(3), pages 262-281, August.
    12. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2005. "How Unobservable Productivity Biases the Value of a Statistical Life," NBER Working Papers 11659, National Bureau of Economic Research, Inc.
    13. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    Cited by:

    1. Jorge Eduardo Martínez Pérez & Ildefonso Méndez Martínez, 2009. "¿Qué podemos saber sobre el Valor Estadístico de la Vida en España utilizando datos laborales?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 191(4), pages 73-93, December.
    2. 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.
    3. 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.
    4. Leiter, Andrea & Thöni, Magdalena & Winner, Hannes, 2012. "Evaluating human life using court decisions on damages for pain and suffering," International Review of Law and Economics, Elsevier, vol. 32(1), pages 119-128.

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    More about this item

    Keywords

    Value of a statistical life (VSL); compensating wage differentials; work accidents; job changes;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • K0 - Law and Economics - - General

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