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How Unobservable Productivity Biases the Value of a Statistical Life

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  • Thomas J. Kniesner
  • W. Kip Viscusi
  • Christopher Woock
  • James P. Ziliak

Abstract

A prominent theoretical controversy in the compensating differentials literature concerns unobservable individual productivity. Competing models yield opposite predictions depending on whether the unobservable productivity is safety-related skill or productivity generally. Using five panel waves and several new measures of worker fatality risks, first-difference estimates imply that omitting individual heterogeneity leads to overestimates of the value of statistical life, consistent with the latent safety-related skill interpretation. Risk measures with less measurement error raise the value of statistical life, the net effect being that estimates from the static model range from $5.3 million to $6.7 million, with dynamic model estimates somewhat higher.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11659.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11659

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  17. Michael P. Keane, 1991. "Individual heterogeneity and interindustry wage differentials," Discussion Paper / Institute for Empirical Macroeconomics 54, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Bilmes, Linda & Stiglitz, Joseph E., 2006. "The Economic Costs of the Iraq War: An Appraisal Three Years after the Beginning of the Conflict," Working Paper Series rwp06-002, Harvard University, John F. Kennedy School of Government.
  2. Ajay Mahal & Brendan O'Flaherty & David E. Bloom, 2009. "Needle Sharing and HIV Transmission: A Model with Markets and Purposive Behavior," NBER Working Papers 14823, National Bureau of Economic Research, Inc.
  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.

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