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What can empirical utility functions tell us about the value of a statistical life?

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  • Elvik, Rune

Abstract

This paper explores how utility functions for income and health state can be applied in order to develop closed-form estimates of the value of a statistical life based on an assumption of utility maximisation. For utility functions fitted to the results of studies of life satisfaction in Norway, most estimates of the value of a statistical life are quite low, in the range of 2–30 million NOK. These estimates refer to reducing the risk of a traffic fatality, which currently is about 20 per 1 million inhabitants in Norway. These estimates are lower than nearly all estimates developed in a road safety valuation study made in 2010. By combining utility functions for health impairments and utility functions for income, it is possible to estimate the monetary compensation for a health impairment needed to restore the initial level of utility. These estimates can be extrapolated to obtain estimates of the value of a statistical life.

Suggested Citation

  • Elvik, Rune, 2025. "What can empirical utility functions tell us about the value of a statistical life?," Research in Transportation Economics, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:retrec:v:110:y:2025:i:c:s0739885925000174
    DOI: 10.1016/j.retrec.2025.101534
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    Keywords

    Utility function; Value of a statistical life; Ex ante; Ex post; Permanent impairment;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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