Using Job Changes to Evaluate the Bias of the Value of a Statistical Life
AbstractThis 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.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 713.
Length: 38 p.
Date of creation: 2007
Date of revision:
Value of a statistical life (VSL); compensating wage differentials; work accidents; job changes;
Other versions of this item:
- Hannes Spengler & Sandra Schaffner, 2007. "Using Job Changes to Evaluate the Bias of the Value of a Statistical Life," Ruhr Economic Papers 0014, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-HEA-2007-08-08 (Health Economics)
- NEP-LAB-2007-08-08 (Labour Economics)
- NEP-LAW-2007-08-08 (Law & Economics)
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