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A quantile estimation approach to identify income and age variation in the value of a statistical life

  • Evans, Mary F.
  • Schaur, Georg

In theory, heterogeneity in individual characteristics translates into variation in the marginal willingness to pay for a mortality risk reduction. Two dimensions of heterogeneity, with respect to income and age, have recently received attention due to their policy relevance. We propose a quantile regression approach to simultaneously explore these two sources of heterogeneity and their interactions within the context of the hedonic wage model, the most common revealed preference approach for obtaining value of statistical life estimates. We illustrate the approach using data from the Health and Retirement Study (HRS). We find that the impact of age on the wage-risk tradeoff varies across the wage distribution. This result indicates important interactions between age and income heterogeneity. Thus, the conventional mean hedonic wage regression, even when the mean effect is allowed to vary with age, masks important heterogeneity.

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File URL: http://www.sciencedirect.com/science/article/pii/S0095-0696(09)00107-7
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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 59 (2010)
Issue (Month): 3 (May)
Pages: 260-270

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Handle: RePEc:eee:jeeman:v:59:y:2010:i:3:p:260-270
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. 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.
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  7. V. Kerry Smith & Mary F. Evans & Hyun Kim & Donald H. Taylor, 2004. "Do the Near-Elderly Value Mortality Risks Differently?," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 423-429, February.
  8. James K. Hammitt, 2007. "Valuing Changes in Mortality Risk: Lives Saved Versus Life Years Saved," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 228-240, Summer.
  9. Alan Krupnick, 2007. "Mortality-risk Valuation and Age: Stated Preference Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 261-282, Summer.
  10. 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.
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  12. Lisa A. Robinson, 2007. "Policy Monitor How US Government Agencies Value Mortality Risk Reductions," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 283-299, Summer.
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  18. 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.
  19. Mary Evans & V. Kerry Smith, 2008. "Complementarity and the Measurement of Individual Risk Tradeoffs: Accounting for Quantity and Quality of Life Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(3), pages 381-400, November.
  20. Hammitt, James K & Graham, John D, 1999. "Willingness to Pay for Health Protection: Inadequate Sensitivity to Probability?," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 33-62, April.
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  22. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
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