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Using Mandated Speed Limits to Measure the Value of a Statistical Life

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  • Orley Ashenfelter
  • Michael Greenstone

Abstract

In 1987 the federal government permitted states to raise the speed limit on their rural interstate roads, but not on their urban interstate roads, from 55 mph to 65 mph. Since the states that adopted the higher speed limit must have valued the travel hours they saved more than the fatalities incurred, this institutional change provides an opportunity to estimate an upper bound on the public's willingness to trade off wealth for a change in the probability of death. Our estimates indicate that the adoption of the 65-mph limit increased speeds by approximately 4 percent, or 2.5 mph, and fatality rates by roughly 35 percent. Together, the estimates suggest that about 125,000 hours were saved per lost life. When the time saved is valued at the average hourly wage, the estimates imply that adopting states were willing to accept risks that resulted in a savings of $1.54 million (1997 dollars) per fatality, with a sampling error roughly one-third this value. We set out a simple model of states' decisions to adopt the 65-mph limit that turns on whether their savings exceed their value of a statistical life. The empirical implementation of this model supports the claim that $1.54 million is an upper bound, but it provides imprecise estimates of the value of a statistical life.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 842.

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Date of creation: Apr 2002
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Handle: RePEc:pri:indrel:dsp01sq87bt61q

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Keywords: value of a statistical life; speed limits; safety risks; value of time;

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  1. Glenn C. Blomquist, 2004. "Self-Protection and Averting Behavior, Values of Statistical Lives, and Benefit Cost Analysis of Environmental Policy," Review of Economics of the Household, Springer, vol. 2(1), pages 89-110, 03.
  2. Keeler, Theodore E, 1994. "Highway Safety, Economic Behavior, and Driving Environment," American Economic Review, American Economic Association, vol. 84(3), pages 684-93, June.
  3. Ruhm, Christopher J., 1996. "Alcohol policies and highway vehicle fatalities," Journal of Health Economics, Elsevier, vol. 15(4), pages 435-454, August.
  4. Deacon, Robert T & Sonstelie, Jon, 1985. "Rationing by Waiting and the Value of Time: Results from a Natural Experiment," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 627-47, August.
  5. Fowles, Richard & Loeb, Peter D, 1989. "Speeding, Coordination, and the 55-MPH Limit: Comment," American Economic Review, American Economic Association, vol. 79(4), pages 916-21, September.
  6. Ghosh, Debapriya & Lees, Dennis & Seal, William, 1975. "Optimal Motorway Speed and Some Valuations of Time and Life," The Manchester School of Economic & Social Studies, University of Manchester, vol. 43(2), pages 134-43, June.
  7. Lave, Charles A, 1985. "Speeding, Coordination, and the 55 MPH Limit," American Economic Review, American Economic Association, vol. 75(5), pages 1159-64, December.
  8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  9. Arianne de Blaeij & Raymond J.G.M. Florax & Piet Rietveld & Erik T. Verhoef, 2000. "The Value of Statistical Life in Road Safety: A Meta-Analysis," Tinbergen Institute Discussion Papers 00-089/3, Tinbergen Institute.
  10. Richard Thaler & Sherwin Rosen, 1976. "The Value of Saving a Life: Evidence from the Labor Market," NBER Chapters, in: Household Production and Consumption, pages 265-302 National Bureau of Economic Research, Inc.
  11. Dee, Thomas S., 1999. "State alcohol policies, teen drinking and traffic fatalities," Journal of Public Economics, Elsevier, vol. 72(2), pages 289-315, May.
  12. Hersch, Joni, 1998. "Compensating Differentials for Gender-Specific Job Injury Risks," American Economic Review, American Economic Association, vol. 88(3), pages 598-627, June.
  13. Lee, N & Dalvi, M Q, 1969. "Variations in the Value of Travel Time," The Manchester School of Economic & Social Studies, University of Manchester, vol. 37(3), pages 213-36, September.
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