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How Unobservable Productivity Biases the Value of a Statistical Life

  • Thomas J. Kniesner
  • W. Kip Viscusi
  • Christopher Woock
  • James P. Ziliak

A prominent theoretical controversy in the compensating differentials literature concerns unobservable individual productivity. Competing models yield opposite predictions depending on whether the unobservable productivity is safety-related skill or productivity generally. Using five panel waves and several new measures of worker fatality risks, first-difference estimates imply that omitting individual heterogeneity leads to overestimates of the value of statistical life, consistent with the latent safety-related skill interpretation. Risk measures with less measurement error raise the value of statistical life, the net effect being that estimates from the static model range from $5.3 million to $6.7 million, with dynamic model estimates somewhat higher.

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File URL: http://www.nber.org/papers/w11659.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11659.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11659
Note: HE LE PE
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  6. Dan A. Black & Thomas K. Kniesner, 2003. "On the Measurement of Job Risk in Hedonic Wage Models," NCEE Working Paper Series 200306, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2003.
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  12. repec:reg:rpubli:282 is not listed on IDEAS
  13. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
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