Using Job Changes to Evaluate the Bias of the Value of a Statistical Life
This paper presents a new approach to obtain 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, which allow to control for unobserved heterogeneity of workers, and conventional cross-sectional estimations, which primarily exploit the variation of wage and risk between different jobs.We find a VSL of 6.1 million euros from pooled cross-sectional estimation, 1.9 million euros from the static first-differences panel model and 3.5 million euros from the job-changer specification.Thus, ignoring individual heterogeneity causes overestimates of the VSL, whereas identifying the wage-risk tradeoff not only by means of between job variation (job-changer model) but also on the basis of noisy variation on the job (panel models) may lead to underestimates of the VSL. Our results can be used to perform cost-benefit analyses of public projects aimed at reducing fatality risks, e.g., in the domains of health, environmental or traffic policy.
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- 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.
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NBER Working Papers
9487, National Bureau of Economic Research, Inc.
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- Spengler, Hannes, 2004. "Kompensatorische Lohndifferenziale und der Wert eines statistischen Lebens in Deutschland," Darmstadt Discussion Papers in Economics 37281, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
- Kniesner, Thomas J. & Viscusi, W. Kip & Woock, Christopher & Ziliak, James P., 2007.
"Pinning Down the Value of Statistical Life,"
IZA Discussion Papers
3107, Institute for the Study of Labor (IZA).
- Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
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