Valuing mortality reductions in India : a study of compensating wage differentials
Conducting cost-benefit analyses of health and safety regulations requires placing a dollar value on reductions in health risks, including the risk of death. In the United States, mortality risks are often valued using compensating-wage differentials. These differentials measure what a worker would have to be paid to accept a small increase in his risk of death-which is assumed to equal what the worker would pay to achieve a small reduction in his risk of death. The authors estimate compensating-wage differentials for risk of fatal and nonfatal injuries in India's manufacturing industry. They estimate a hedonic wage equation using the most recent Occupational Wage Survey, supplemented by data on occupational injuries from the Indian Labour Yearbook. Their estimates of compensating-wage differentials imply a value of statistical life (VSL) in India of 6.4 million to 15 million 1990 rupees (roughly $150,000 to $360,000 at current exchange rates). This number is between 20 and 48 times forgone earnings-the human capital measure of the value of reducing the risk of death. The ratio of the VSL to forgone earnings implied by the study is larger than in comparable U.S. studies but smaller than the ratio implied by the only other compensating-wage study for India (Shanmugam 1997). The latter implies a ratio of VSL to forgone earnings of 73! The authors caution that in India, as in the United States, compensating-wage differentials in the labor market may overstate what individuals would themselves pay to reduce the risk of death. They suggest using their estimates as an upper boundon willingness to pay to reduce risk of death, and forgone earnings as a lower bound.
|Date of creation:||31 Jan 1999|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hans P. Binswanger, 1980.
"Attitudes Toward Risk: Experimental Measurement in Rural India,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- Bayless, Mark, 1982. "Measuring the benefits of air quality improvements: A hedonic salary approach," Journal of Environmental Economics and Management, Elsevier, vol. 9(1), pages 81-99, March.
- Cousineau, Jean-Michel & Lacroix, Robert & Girard, Anne-Marie, 1992. "Occupational Hazard and Wage Compensating Differentials," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 166-169, February.
- Viscusi, W. Kip & Moore, Michael J., 1989. "Rates of time preference and valuations of the duration of life," Journal of Public Economics, Elsevier, vol. 38(3), pages 297-317, April.
- Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
- Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
- Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
- Loehman, Edna & De, Vo Hu, 1982. "Application of Stochastic Choice Modeling to Policy Analysis of Public Goods: A Case Study of Air Quality Improvements," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 474-480, August.
- Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
- Kniesner, Thomas J & Leeth, John D, 1991. "Compensating Wage Differentials for Fatal Injury Risk in Australia, Japan, and the United States," Journal of Risk and Uncertainty, Springer, vol. 4(1), pages 75-90, January.
- Alberini, Anna & Cropper, Maureen & Fu, Tsu-Tan & Krupnick, Alan & Liu, Jin-Tan & Shaw, Daigee & Harrington, Winston, 1997. "Valuing Health Effects of Air Pollution in Developing Countries: The Case of Taiwan," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 107-126, October.
- Moore, Michael J. & Viscusi, W. Kip, 1990. "Discounting environmental health risks: New evidence and policy implications," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 51-62, March.
- Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-647, June.
- Liu, Jin-Tan & Hammitt, James K. & Liu, Jin-Long, 1997. "Estimated hedonic wage function and value of life in a developing country," Economics Letters, Elsevier, vol. 57(3), pages 353-358, December. Full references (including those not matched with items on IDEAS)