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Heterogeneity in the Value of Life

Author

Listed:
  • Aldy, Joseph E.
  • Smyth, Seamus J.

Abstract

We develop a numerical life-cycle model -- with choice over consumption and leisure, stochastic mortality and labor income processes, and calibrated to U.S. data -- to characterize willingness to pay (WTP) for mortality risk reduction. Our theoretical framework can explain many empirical findings in this literature, including an inverted-U life-cycle WTP and an order of magnitude difference in prime-aged adults WTP. By endogenizing leisure and employing multiple income measures, we reconcile the literature's large variation in estimated income elasticities. By accounting for gender- and race-specic stochastic mortality and income processes, we explain the literature's black-white and female-male differences.

Suggested Citation

  • Aldy, Joseph E. & Smyth, Seamus J., 2014. "Heterogeneity in the Value of Life," RFF Working Paper Series dp-14-13, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-14-13
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-14-13.pdf
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    Citations

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    Cited by:

    1. James K. Hammitt, 2020. "Valuing mortality risk in the time of COVID-19," Journal of Risk and Uncertainty, Springer, vol. 61(2), pages 129-154, October.
    2. Marten, Alex L. & Newbold, Stephen C., 2017. "Economy-Wide Effects of Mortality Risk Reductions from Environmental Policies," National Center for Environmental Economics-NCEE Working Papers 280938, United States Environmental Protection Agency (EPA).
    3. Vanschoonbeek, Jakob, 2020. "Regional (in)stability in Europe a quantitative model of state fragmentation," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 605-641.
    4. Joseph E. Aldy, 2019. "Birds of a feather: Estimating the value of statistical life from dual-earner families," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 187-205, June.
    5. Barreca, Alan I. & Neidell, Matthew & Sanders, Nicholas J., 2021. "Long-run pollution exposure and mortality: Evidence from the Acid Rain Program," Journal of Public Economics, Elsevier, vol. 200(C).
    6. Bauer, Daniel & Lakdawalla, Darius & Reif, Julian, 2025. "Health risk and the value of life," Journal of Public Economics, Elsevier, vol. 245(C).
    7. James O’Brien, 2018. "Age, autos, and the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 57(1), pages 51-79, August.
    8. St-Amour, Pascal, 2024. "Valuing life over the life cycle," Journal of Health Economics, Elsevier, vol. 93(C).
    9. Joseph E. Aldy, 2019. "Birds of a Feather: Estimating the Value of Statistical Life from Dual-Earner Families," NBER Working Papers 25708, National Bureau of Economic Research, Inc.
    10. Aldy, Joseph E. & Atkinson, Giles & Kotchen, Matthew J., 2021. "Environmental benefit-cost analysis: a comparative analysis between the United States and the United Kingdom," LSE Research Online Documents on Economics 110879, London School of Economics and Political Science, LSE Library.
    11. Beth Woods & Paul Revill & Mark Sculpher & Karl Claxton, 2015. "Country-level cost-effectiveness thresholds: initial estimates and the need for further research," Working Papers 109cherp, Centre for Health Economics, University of York.

    More about this item

    Keywords

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    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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