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Pinning Down the Value of Statistical Life

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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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File URL: http://www.maxwell.syr.edu/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=36507229414
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Bibliographic Info

Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Working Papers with number 85.

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Length: 29 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:max:cprwps:85

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Postal: 426 Eggers Hall, Syracuse, New York USA 13244-1020
Phone: (315) 443-3114
Fax: (315) 443-1081
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Web page: http://www.maxwell.syr.edu/cpr.aspx
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References

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  1. Orley Ashenfelter, 2005. "Measuring the Value of a Statistical Life: Problems and Prospects," Working Papers 884, Princeton University, Department of Economics, Industrial Relations Section..
  2. Orley Ashenfelter & Michael Greenstone, 2004. "Estimating the Value of a Statistical Life: The Importance of Omitted Variables and Publication Bias," Working Papers 3, Princeton University, Department of Economics, Industrial Relations Section..
  3. 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, vol. 18(1), pages 83-114, January.
  4. Michael P. Keane, 1993. "Individual Heterogeneity and Interindustry Wage Differentials," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 134-161.
  5. Ekeland, Ivar & Heckman, James J. & Nesheim, Lars, 2003. "Identification and Estimation of Hedonic Models," IZA Discussion Papers 853, Institute for the Study of Labor (IZA).
  6. Black, Dan A & Kniesner, Thomas J, 2003. " On the Measurement of Job Risk in Hedonic Wage Models," Journal of Risk and Uncertainty, Springer, vol. 27(3), pages 205-20, December.
  7. Thomas J. Kniesner & James P. Ziliak & W. Kip Viscusi, 2004. "Life-Cycle Consumption and the Age-Adjusted Value of Life," NBER Working Papers 10266, National Bureau of Economic Research, Inc.
  8. 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.
  9. 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.
  10. Ashenfelter, Orley & Greenstone, Michael, 2003. "Using Mandated Speed Limits to Measure the Value of a Statistical Life," Working paper 86, Regulation2point0.
  11. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
  12. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  13. 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.
  14. Arellano, M., 1989. "A Note On The Anderson-Hsiao Estimator For Panel Data," Economics Series Working Papers 9975, University of Oxford, Department of Economics.
  15. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-58, August.
  16. 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.
  17. Kosec, Katrina & Wallsten, Scott, 2005. "The Economic Costs of the War in Iraq," Working paper 42, Regulation2point0.
  18. Ziliak, J.P. & Kniesner, T.J., 1996. "The Importance of Sample Attrition in Life Cycle Labor Supply," Discussion Paper 1996-46, Tilburg University, Center for Economic Research.
  19. 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, vol. 45(4), pages 1111-1128, November.
  20. Kosec, Katrina & Wallsten, Scott, 2005. "The Economic Costs of the War in Iraq," Working paper 334, Regulation2point0.
  21. 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.
  22. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  23. Gary Solon, 1986. "Bias in Longitudinal Estimation of Wage Gaps," NBER Technical Working Papers 0058, National Bureau of Economic Research, Inc.
  24. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, vol. 47(2), pages 437-54, March.
  25. 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.
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Citations

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Cited by:
  1. 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).
  2. Scotton, Carol R. & Taylor, Laura O., 2011. "Valuing risk reductions: Incorporating risk heterogeneity into a revealed preference framework," Resource and Energy Economics, Elsevier, vol. 33(2), pages 381-397, May.
  3. 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.
  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. 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.
  6. Schaffner, Sandra & Spengler, Hannes, 2010. "Using job changes to evaluate the bias of value of a statistical life estimates," Resource and Energy Economics, Elsevier, vol. 32(1), pages 15-27, January.
  7. 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, vol. 28(2), pages 444-464, March.
  8. 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, vol. 39(6), pages 658-669, November.
  9. 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, vol. 49(3), pages 425-443, July.
  10. 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.

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