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Using Job Changes to Evaluate the Bias of the Value of a Statistical Life

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  • Hannes Spengler

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  • Sandra Schaffner

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Abstract

This 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 Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0014.

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Length: 40 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:rwi:repape:0014

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Keywords: Value of a statistical life (VSL); compensating wage differentials; work accidents; job changes;

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  1. Spengler, Hannes, 2004. "Kompensatorische Lohndifferenziale und der Wert eines statistischen Lebens in Deutschland," Darmstadt Discussion Papers in Economics 37281, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  2. Kniesner, Thomas J. & Viscusi, W. Kip & Woock, Christopher & Ziliak, James P., 2007. "Pinning Down the Value of Statistical Life," IZA Discussion Papers 3107, Institute for the Study of Labor (IZA).
  3. 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.
  4. Shogren, Jason F. & Stamland, Tommy, 2006. "Consistent estimation of the value of statistical life," Resource and Energy Economics, Elsevier, vol. 28(3), pages 262-281, August.
  5. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
  6. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2005. "How Unobservable Productivity Biases the Value of a Statistical Life," NBER Working Papers 11659, National Bureau of Economic Research, Inc.
  7. 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.
  8. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
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Cited by:
  1. 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.
  2. Kniesner, Thomas J. & Viscusi, W. Kip & Woock, Christopher & Ziliak, James P., 2007. "Pinning Down the Value of Statistical Life," IZA Discussion Papers 3107, Institute for the Study of Labor (IZA).

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