Article

Journal of Risk and Uncertainty

, Volume 40, Issue 1, pp 15-31

First online:

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

  • Thomas J. KniesnerAffiliated withSenior Research Associate, Center for Policy Research, Syracuse UniversityIZA Email author 
  • , W. Kip ViscusiAffiliated withUniversity Distinguished Professor of Law, Economics, and Management, Vanderbilt University
  • , James P. ZiliakAffiliated withCarol Martin Gatton Chair in Microeconomics, Center for Poverty Research, University of Kentucky

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access

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.

Keywords

Value of statistical life VSL Quantile regression Panel data Fixed effects PSID Fatality risk CFOI
JEL Classification C23 I10 J17 J28 K00