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Adjusting the Value of a Statistical Life for Age and Cohort Effects

Author

Listed:
  • Joseph E. Aldy

    (Resources for the Future)

  • W. Kip Viscusi

    (University Distinguished Professor of Law, Economics, and Management, Vanderbilt University)

Abstract

To resolve the theoretical ambiguity in the effect of age on the value of statistical life (VSL), this article uses a novel, age-dependent fatal risk measure to estimate age-specific hedonic wage regressions. VSL exhibits an inverted-U-shaped relationship with age. In the year 2000 cross section, workers' VSL rises from $3.7 million (ages 18-24) to $9.7 million (35-44), and declines to $3.4 million (55-62). Controlling for birth-year cohort effects in a minimum distance estimator yields a peak VSL of $7.8 million at age 46, and flattens the age-VSL relationship. The value of statistical life-year also follows an inverted-U shape with age. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Joseph E. Aldy & W. Kip Viscusi, 2008. "Adjusting the Value of a Statistical Life for Age and Cohort Effects," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 573-581, August.
  • Handle: RePEc:tpr:restat:v:90:y:2008:i:3:p:573-581
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    References listed on IDEAS

    as
    1. 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.
    2. Hersch, Joni, 1998. "Compensating Differentials for Gender-Specific Job Injury Risks," American Economic Review, American Economic Association, vol. 88(3), pages 598-627, June.
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    11. W. Kip Viscusi & Joni Hersch, 2001. "Cigarette Smokers As Job Risk Takers," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 269-280, May.
    12. W. Kip Viscusi, 2004. "The Value of Life: Estimates with Risks by Occupation and Industry," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 29-48, January.
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    16. 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.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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