Advertisement

Environmental and Resource Economics

, Volume 49, Issue 3, pp 425–443 | Cite as

Aggregation Biases in Estimates of the Value per Statistical Life: Evidence from Longitudinal Matched Worker-Firm Data in Taiwan

  • Wehn-Jyuan Tsai
  • Jin-Tan Liu
  • James K. Hammitt
Article

Abstract

This study uses a unique longitudinally-linked employer–employee dataset to estimate the magnitude of bias in estimating the value per statistical life (VSL) that arises from the conventional use of industry-average occupational risk. This unique dataset, covering workers in Taiwan over the period 1998–2002, allows us to distinguish among potential sources of bias including omitted variables and to control for the potential endogeneity of firm-specific job risk with respect to unobserved worker and firm characteristics. We find that VSL estimates based on risk data aggregated by three-digit manufacturing SIC codes are biased downward by an order of magnitude compared with estimates using firm-specific risk that control for endogeneity.

Keywords

Value per statistical life Firm-level risk data Linked employer-employee data 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Bergstrom T (1982) When is a man’s life worth more than his human capital? In: Jones-Lee (ed) The value of life and safety. North-Holland, AmsterdamGoogle Scholar
  2. Black DA, Kniesner TJ (2003) On the measurement of job risk in hedonic wage models. J Risk Uncertain 27(3): 205–220CrossRefGoogle Scholar
  3. Bound J, Jaeger DA, Baker RM (1995) Problems with instrumental variables estimation when the correlation between the instruments and the endogenous explanatory variable is weak. J Am Stat Assoc 90(430): 443–450CrossRefGoogle Scholar
  4. Brown C (1980) Equalizing differences in the labor market. Q J Econ 94(1): 113–134CrossRefGoogle Scholar
  5. Burtraw D, Krupnick A, Mansur E, Austin D, Farrell D (1998) Costs and benefits of reducing air pollutants related to acid rain. Contemp Econ Policy 16(4): 379–400CrossRefGoogle Scholar
  6. Cornwell C, Schmidt P, Wyhowski D (1992) Simultaneous equations and panel data. J Econom 51(1–2): 151–181CrossRefGoogle Scholar
  7. Cousineau J-M, Lacroix R, Girard A-M (1992) Occupational hazard and wage compensating differentials. Rev Econ Stat 74(1): 166–169CrossRefGoogle Scholar
  8. Dale-Olsen H (2006) Estimating workers’ marginal willingness to pay for safety using linked employer–employee data. Economica 73(289): 99–127CrossRefGoogle Scholar
  9. Frank RH, Sunstein CR (2001) Cost-benefit analysis and relative position. Univ Chic Law Rev 68(2): 323–374CrossRefGoogle Scholar
  10. Garen J (1988) Compensating wage differentials and the endogeneity of job riskiness. Rev Econ Stat 70(1): 9–16CrossRefGoogle Scholar
  11. Gegax D, Gerking S, Schulze W (1991) Perceived risk and the marginal value of safety. Rev Econ Stat 73: 589–596CrossRefGoogle Scholar
  12. Getzner M (2008) Uncertainties and the precautionary principle in cost-benefit environmental policies. J Policy Model 30(1): 1–17CrossRefGoogle Scholar
  13. Hamermesh DS (1999) LEEping into the future of labor economics: the research potential of linking employer and employee data. Labour Economics 6(1): 25–41CrossRefGoogle Scholar
  14. Hammitt JK, Robinson LA (in press) The income elasticity of the value per statistical life: transferring estimates between high and low income populations. J Benefit-Cost AnalGoogle Scholar
  15. Hanushek EA, Rivkin SG, Taylor LL (1996) Aggregation and the estimated effects of school resources. Rev Econ Stat 78(4): 611–627CrossRefGoogle Scholar
  16. Hersch J (1998) Compensating differentials for gender-specific job injury risks. Am Econ Rev 88(3): 598–607Google Scholar
  17. Hintermann B, Alberini A, Markandya A (2010) Estimating the value of safety with labor market data: are the results trustworthy. Appl Econ 42(9): 1085–1100CrossRefGoogle Scholar
  18. Kniesner TJ, Viscusi WK (2005) Value of a statistical life: relative position vs. relative age. Am Econ Rev 95(2): 142–146CrossRefGoogle Scholar
  19. Kniesner TJ, Viscusi WK, Woock C, Ziliak JP (October 2007) Pinning down the value of statistical life. IZA Discussion Paper No. 3107Google Scholar
  20. Lalive R (2003) Did we overestimate the value of health?. J Risk Uncertain 27(2): 171–193CrossRefGoogle Scholar
  21. Liu J-T, Hammitt JK (1999) Perceived risk and value of workplace safety in a developing country. J Risk Res 2(3): 263–275CrossRefGoogle Scholar
  22. Liu J-T, Hammitt JK, Liu J-L (1997) Estimated hedonic wage function and value of life in a developing country. Econ Lett 57(3): 353–358CrossRefGoogle Scholar
  23. Raucher RS (2003) Benefit-cost analysis and drinking water regulation. In: Pontius FW (ed) Drinking water regulation and health. Wiley, New York, pp 225–250CrossRefGoogle Scholar
  24. Rosen S (1986) The theory of equalizing differences. In: Ashenfelter O, Layard R (eds) Handbook of labor economics. North-Holland, Amsterdam, pp 641–692CrossRefGoogle Scholar
  25. Shogren JF, Stamland T (2002) Skill and the value of life. J Polit Econ 110(5): 1168–1173CrossRefGoogle Scholar
  26. Staiger D, Stock JH (1997) Instrumental variables regression with weak instruments. Econometrica 65(3): 557–586CrossRefGoogle Scholar
  27. Viscusi WK (2004) The value of life: estimates with risks by occupation and industry. Econ Inq 42(1): 29–48CrossRefGoogle Scholar
  28. Viscusi WK, O’Connor CJ (1984) Adaptive responses to chemical labeling: are workers Bayesian decision makers. Am Econ Rev 74(5): 942–956Google Scholar
  29. Viscusi WK, Hersch J (2001) Cigarette smokers as job risk takers. Rev Econ Stat 83(2): 269–280CrossRefGoogle Scholar
  30. Viscusi WK, Aldy JE (2003) The value of a statistical life: a critical review of market estimates throughout the world. J Risk Uncertain 27(1): 5–76CrossRefGoogle Scholar
  31. Wei X (2007) Wage compensation for job-related illness: evidence from a matched employer and employee survey in the UK. J Risk Uncertain 34(1): 85–98CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  • Wehn-Jyuan Tsai
    • 1
  • Jin-Tan Liu
    • 2
    • 3
  • James K. Hammitt
    • 4
    • 5
  1. 1.Department of EconomicsShih Hsin UniversityTaipeiTaiwan
  2. 2.Department of EconomicsNational Taiwan UniversityTaipeiTaiwan
  3. 3.NBERCambridgeUSA
  4. 4.Center for Risk AnalysisHarvard UniversityCambridgeUSA
  5. 5.LERNA-INRAToulouse School of EconomicsToulouseFrance

Personalised recommendations