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Using job changes to evaluate the bias of value of a statistical life estimates

  • Schaffner, Sandra
  • Spengler, Hannes

This paper presents a new approach to obtaining 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, allowing us to control for unobserved heterogeneity of workers, and conventional cross-sectional estimations, which are less affected by measurement error. We find a VSL of 6.1 million euros from pooled cross-sectional estimation, 1.5 million euros from the first-differences panel model and 2.0 million euros from the job-changer specification. Thus, ignoring individual heterogeneity causes overestimates of the VSL, whereas the attenuation bias in panel data models leads to underestimates of the VSL. Our results are less biased than former results and can be used to perform cost-benefit analyses of public projects aimed at reducing fatality risks, e.g., in the domains of environmental, health, or traffic policy.

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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 1 (January)
Pages: 15-27

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Handle: RePEc:eee:resene:v:32:y:2010:i:1:p:15-27
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  1. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2006. "Pinning Down the Value of Statistical Life," Center for Policy Research Working Papers 85, Center for Policy Research, Maxwell School, Syracuse University.
  2. 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.
  3. repec:dar:ddpeco:37281 is not listed on IDEAS
  4. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
  5. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-58, August.
  6. Ernesto Villanueva, 2007. "Estimating Compensating Wage Differentials Using Voluntary Job Changes: Evidence from Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(4), pages 544-561, July.
  7. Garen, John, 1988. "Compensating Wage Differentials and the Endogeneity of Job Riskiness," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 9-16, February.
  8. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  9. repec:tpr:qjecon:v:94:y:1980:i:1:p:113-34 is not listed on IDEAS
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