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Pinning Down the Value of Statistical Life

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Author Info

  • Kniesner, Thomas J.

    ()
    (Syracuse University)

  • Viscusi, W. Kip

    ()
    (Vanderbilt University)

  • Woock, Christopher

    ()
    (The Conference Board)

  • Ziliak, James P.

    ()
    (University of Kentucky)

Abstract

Our research addresses fundamental long-standing concerns in the compensating wage differentials literature and its public policy implications: the econometric properties of estimates of the value of statistical life (VSL) and the wide range of such estimates from about $0.5 million to about $21 million. We address most of the prominent econometric issues by applying panel data, a new and more accurate fatality risk measure, and systematic selection of panel estimator in our research. Controlling for measurement error, endogeneity, individual heterogeneity, and state dependence yields both a reasonable average level and narrow range for the estimated value of a statistical life of about $5.5–$7.5 million.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3107.

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Length: 34 pages
Date of creation: Oct 2007
Date of revision:
Publication status: published in: Review of Economics and Statistics, 2012, 94 (1) , 74-87
Handle: RePEc:iza:izadps:dp3107

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Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
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Web page: http://www.iza.org

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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
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Related research

Keywords: random effects; fixed effects; panel data; VSL; PSID;

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References

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  1. Michael P. Keane, 1993. "Individual Heterogeneity and Interindustry Wage Differentials," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 134-161.
  2. Orley Ashenfelter & Michael Greenstone, 2002. "Using Mandated Speed Limits to Measure the Value of a Statistical Life," NBER Working Papers 9094, National Bureau of Economic Research, Inc.
  3. W. Kip Viscusi & Joni Hersch, 2001. "Cigarette Smokers As Job Risk Takers," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 269-280, May.
  4. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, Elsevier, vol. 18(1), pages 83-114, January.
  5. Ashenfelter, Orley, 2006. "Measuring the Value of a Statistical Life: Problems and Prospects," IZA Discussion Papers 1911, Institute for the Study of Labor (IZA).
  6. W. Kip Viscusi & Joseph E. Aldy, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," NBER Working Papers 9487, National Bureau of Economic Research, Inc.
  7. Ekeland, Ivar & Heckman, James J. & Nesheim, Lars, 2004. "Identification and Estimation of Hedonic Models," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6486, Paris Dauphine University.
  8. Ashenfelter, Orley & Greenstone, Michael, 2004. "Estimating the Value of a Statistical Life: The Importance of Omitted Variables and Publication Bias," IZA Discussion Papers 1037, Institute for the Study of Labor (IZA).
  9. 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.
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  11. Kniesner Thomas J & Viscusi W. Kip & Ziliak James P, 2006. "Life-Cycle Consumption and the Age-Adjusted Value of Life," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 5(1), pages 1-36, January.
  12. Kevin Lang & Sumon Majumdar, 2004. "The Pricing Of Job Characteristics When Markets Do Not Clear: Theory And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1111-1128, November.
  13. Black, Dan A & Kniesner, Thomas J, 2003. " On the Measurement of Job Risk in Hedonic Wage Models," Journal of Risk and Uncertainty, Springer, Springer, vol. 27(3), pages 205-20, December.
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  16. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 437-54, March.
  17. Arellano, M., 1989. "A Note On The Anderson-Hsiao Estimator For Panel Data," Economics Series Working Papers, University of Oxford, Department of Economics 9975, University of Oxford, Department of Economics.
  18. 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.
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  21. Hannes Spengler & Sandra Schaffner, 2007. "Using Job Changes to Evaluate the Bias of the Value of a Statistical Life," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0014, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  22. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(1), pages 113-34, February.
  23. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(4), pages 835-58, August.
  24. Gary Solon, 1986. "Bias in Longitudinal Estimation of Wage Gaps," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0058, National Bureau of Economic Research, Inc.
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  26. Ziliak, J.P. & Kniesner, T.J., 1996. "The Importance of Sample Attrition in Life Cycle Labor Supply," Discussion Paper, Tilburg University, Center for Economic Research 1996-46, Tilburg University, Center for Economic Research.
  27. Jason F. Shogren & Tommy Stamland, 2002. "Skill and the Value of Life," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(5), pages 1168-1197, October.
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Citations

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Cited by:
  1. Dionne, Georges & Lebeau, Martin, 2010. "Le calcul de la valeur statistique d'une vie humaine
    [Estimation of statistical value of life]
    ," MPRA Paper 37573, University Library of Munich, Germany.
  2. Scotton, Carol R. & Taylor, Laura O., 2011. "Valuing risk reductions: Incorporating risk heterogeneity into a revealed preference framework," Resource and Energy Economics, Elsevier, Elsevier, vol. 33(2), pages 381-397, May.
  3. Bellavance, Franois & Dionne, Georges & Lebeau, Martin, 2009. "The value of a statistical life: A meta-analysis with a mixed effects regression model," Journal of Health Economics, Elsevier, Elsevier, vol. 28(2), pages 444-464, March.
  4. Thomas DeLeire & Christopher Timmins, 2008. "Roy Model Sorting and Non-Random Selection in the Valuation of a Statistical Life," NBER Working Papers 14364, National Bureau of Economic Research, Inc.
  5. Hammitt, James & Roman, Henry & Stieb, David & Walsh, Tyra, 2012. "Expert Elicitation of the Value per Statistical Life in an Air Pollution Context," LERNA Working Papers, LERNA, University of Toulouse 12.10.367, LERNA, University of Toulouse.
  6. Martinez Perez, Jorge Eduardo & Mendez Martinez, Ildefonso, 2008. "¿Qué podemos saber sobre el Valor Estadístico de la Vida en España utilizando datos laborales?," MPRA Paper 11165, University Library of Munich, Germany.
  7. Wehn-Jyuan Tsai & Jin-Tan Liu & James Hammitt, 2011. "Aggregation Biases in Estimates of the Value per Statistical Life: Evidence from Longitudinal Matched Worker-Firm Data in Taiwan," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 49(3), pages 425-443, July.
  8. 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.
  9. Schaffner, Sandra & Spengler, Hannes, 2010. "Using job changes to evaluate the bias of value of a statistical life estimates," Resource and Energy Economics, Elsevier, Elsevier, vol. 32(1), pages 15-27, January.
  10. Naoi, Michio & Seko, Miki & Sumita, Kazuto, 2009. "Earthquake risk and housing prices in Japan: Evidence before and after massive earthquakes," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(6), pages 658-669, November.
  11. Goucher, Jeremy & Horrace, William C., 2012. "The value of life: Real risks and safety-related productivity in the Himalaya," Labour Economics, Elsevier, Elsevier, vol. 19(1), pages 27-32.

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