Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions

Thomas J. Kniesner; W. Kip Viscusi; James P. Ziliak

doi:10.1007/s11166-009-9084-y

Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions

Thomas J. Kniesner, W. Kip Viscusi, James P. Ziliak

Research output: Contribution to journal › Article › peer-review

81 Scopus citations

Abstract

We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cut-off for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably across the labor force. Our results reconcile the previous discrepancies between hedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.

Original language	English
Pages (from-to)	15-31
Number of pages	17
Journal	Journal of Risk and Uncertainty
Volume	40
Issue number	1
DOIs	https://doi.org/10.1007/s11166-009-9084-y
State	Published - Jan 2010

Keywords

CFOI
Fatality risk
Fixed effects
PSID
Panel data
Quantile regression
VSL
Value of statistical life

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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10.1007/s11166-009-9084-y

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abstract = "We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cut-off for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably across the labor force. Our results reconcile the previous discrepancies between hedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.",

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AU - Viscusi, W. Kip

AU - Ziliak, James P.

PY - 2010/1

Y1 - 2010/1

N2 - We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cut-off for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably across the labor force. Our results reconcile the previous discrepancies between hedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.

AB - We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cut-off for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably across the labor force. Our results reconcile the previous discrepancies between hedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.

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Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions

Abstract

Keywords

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