Abstract
Our research clarifies the conceptual linkages among willingness to pay for additional safety, willingness to accept less safety, and the value of a statistical life (VSL). We present econometric estimates using panel data to analyze the VSL levels associated with job changes that may affect the worker’s exposure to fatal injury risks. Our baseline VSL estimates are $7.7 million and $8.3 million (Y$2001). There is no statistically significant divergence between willingness-to-accept VSL estimates associated with wage increases for greater risks and willingness-to-pay VSL estimates as reflected in wage changes for decreases in risk. Our focal result contrasts with the literature documenting a considerable asymmetry in tradeoff rates for increases and decreases in risk. An important implication for policy is that it is reasonable to use labor market estimates of VSL as a measure of the willingness to pay for additional safety.
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Notes
See U.S. Office of Management and Budget Circular A-4, Regulatory Analysis (Sept. 17, 2003), which is available at http://www.whitehouse.gov/omb/circulars_a004_a-4 (Last accessed July 24, 2013); Memorandum to Secretarial Officers Modal Administrators from Polly Trottenberg, Under Secretary for Policy and Robert S. Rivkin, General Counsel, Guidance on Treatment of the Economic Value of a Statistical Life in U.S. Department of Transportation Analyses, Office of the Secretary of Transportation, U.S. Department of Transportation, 2013. Available at http://www.dot.gov/office-policy/transportation-policy/guidance-treatment-economic-value-statistical-life (Last accessed July 24, 2013); and U.S. Environmental Protection Agency, “Valuing Mortality Risk Reductions for Environmental Policy: A White Paper,” SAB Review Draft, 2010.
For minor health effects that do not reduce the marginal utility of income, Chilton et al. (2012) report stated preference evidence indicating a narrowing of the WTA/WTP gap for more minor health effects.
If workers have a beta distribution of assessed fatal injury risks where γ is the informational content of the prior and p0 reflects the probability of an adverse outcome, the posterior probability of p *0 that prevails after observing information equivalent to one unfavorable trial outcome is (γp0 + 1)/(γ +1) > p0.
When there is time-invariant non-random attrition, the differenced data models we use will remove it along with other latent time-invariant factors (Ziliak and Kniesner 1998).
In Kniesner et al. (2012) the estimated VSL from the pooled model that included job stayers is $6.6 million. Although this is statistically the same as the pooled VSLs reported in Tables 1 and 2 here, the qualitatively lower point estimate results from dampened variation in industry/occupation fatal risk among job stayers.
A worker moving to a riskier job that poses an additional 5/100,000 risk will receive an added wage premium of $350, which is 0.7% of average annual income. Based on estimates of the income elasticity of VSL (Viscusi and Aldy 2003), the effect of such income changes on the VSL will be under 0.5%.
As part of specification checks we ran regressions similar to those in Table 1 for persons who did not change jobs. In all cases estimated VSL was either insignificant or negative. Additionally, results similar to those in Table 1 (symmetry of estimated VSL) appear when we include a dummy variable for positive change in fatal injury rate so the linear segments need not join at a common point. For more discussion of the general econometric issue see Hamermesh (1999).
Note that the subsample of “when change jobs” might involve more complicated time-varying effects, as we discuss below.
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Jack Knetsch provided insightful suggestions. This research was conducted with restricted access to BLS data. The views expressed here do not necessarily reflect the views of the BLS
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Kniesner, T.J., Viscusi, W.K. & Ziliak, J.P. Willingness to accept equals willingness to pay for labor market estimates of the value of a statistical life. J Risk Uncertain 48, 187–205 (2014). https://doi.org/10.1007/s11166-014-9192-1
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DOI: https://doi.org/10.1007/s11166-014-9192-1