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The Valuation of Risk of Death in Public Sector Decision-Making

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  • R. A. Meng
  • Douglas A. Smith

Abstract

The unavoidable trade-off between monetary expenditures and health and safety benefits means that the risk of death must be considered in a wide variety of public sector decisions. This paper argues that this consideration should be explicit and consistent across policy areas. The most conceptually valid approach to the valuation of benefits from reduced risk is to base estimates on the required compensation for exposure to risk. An empirical estimate of required compensation is generated by measuring the statistical value of life based on data from the Canadian labor market. The estimated value of life is $5.2 million in 1983 dollars. This is recommended as a useful lower bound estimate for a variety of public policy applications in Canada. In some applications, we argue that substantially higher values are required.

Suggested Citation

  • R. A. Meng & Douglas A. Smith, 1990. "The Valuation of Risk of Death in Public Sector Decision-Making," Canadian Public Policy, University of Toronto Press, vol. 16(2), pages 137-144, June.
    • Handle: RePEc:cpp:issued:v:16:y:1990:i:2:p:137-144
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    References listed on IDEAS

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    1. Craig A. Olson, 1981. "An Analysis of Wage Differentials Received by Workers on Dangerous Jobs," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 167-185.
    2. Marin, Alan & Psacharopoulos, George, 1982. "The Reward for Risk in the Labor Market: Evidence from the United Kingdom and a Reconciliation with Other Studies," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 827-853, August.
    3. Dillingham, Alan E, 1985. "The Influence of Risk Variable Definition on Value-of-Life Estimates," Economic Inquiry, Western Economic Association International, vol. 23(2), pages 277-294, April.
    4. Blomquist, Glenn C, 1979. "Value of Life Saving: Implications of Consumption Activity," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 540-558, June.
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    Cited by:

    1. Nikolaos Georgantzis & Efi Vasileiou, 2014. "Are Dangerous Jobs Paid Better? European Evidence," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 163-192, Emerald Group Publishing Limited.
    2. Joseph E. Aldy & W. Kip Viscusi, 2007. "Age Differences in the Value of Statistical Life: Revealed Preference Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 241-260, Summer.
    3. Dionne, Georges & Lanoie, Paul, 2002. "How to make a public choice about the value of a statistical life: The case of road safety," Working Papers 02-2, HEC Montreal, Canada Research Chair in Risk Management.
    4. Marcela Parada-Contzen & Andrés Riquelme-Won & Felipe Vasquez-Lavin, 2013. "The value of a statistical life in Chile," Empirical Economics, Springer, vol. 45(3), pages 1073-1087, December.
    5. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    6. Kip Viscusi, W. & Aldy, Joseph E., 2007. "Labor market estimates of the senior discount for the value of statistical life," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 377-392, May.
    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. Dionne, Georges & Lebeau, Martin, 2010. "Le calcul de la valeur statistique d’une vie humaine," L'Actualité Economique, Société Canadienne de Science Economique, vol. 86(4), pages 487-530, décembre.
    9. Joseph E. Aldy & W. Kip Viscusi, 2004. "Age Variations in Workers' Value of Statistical Life," NBER Working Papers 10199, National Bureau of Economic Research, Inc.
    10. W. Kip Viscusi & Clayton Masterman, 2017. "Anchoring biases in international estimates of the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 54(2), pages 103-128, April.
    11. Alan Krupnick, 2002. "The value of reducing risk of death: a policy perspective," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(2), pages 275-282.
    12. Meng, Ronald, 1991. "Compensating wages for long-term job hazards in Canadian industry," Economics Letters, Elsevier, vol. 36(3), pages 331-336, July.

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