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Life-Cycle Consumption and the Age-Adjusted Value of Life

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Author Info
Thomas J. Kniesner
James P. Ziliak
W. Kip Viscusi

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Abstract

Our research examines empirically the age pattern of the implicit value of life revealed from workers' differential wages and job safety pairings. Although aging reduces the number of years of life expectancy, aging can affect the value of life through an effect on planned life-cycle consumption. The elderly could, a priori, have the highest implicit value of life if there is a life-cycle plan to defer consumption until old age. We find that largely due to the age pattern of consumption, which is non-constant, the implicit value of life rises and falls over the lifetime in a way that the value for the elderly is higher than the average over all ages or for the young. There are important policy implications of our empirical results. Because there may be age-specific benefits of programs to save statistical lives, instead of valuing the lives of the elderly at less than the young, policymakers should more correctly value the lives of the elderly at as much as twice the young because of relatively greater consumption lost when accidental death occurs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10266.

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Date of creation: Feb 2004
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Handle: RePEc:nbr:nberwo:10266

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Find related papers by JEL classification:
J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
I12 - Health, Education, and Welfare - - Health - - - Health Production

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References listed on IDEAS
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.:
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    Other versions:
  2. Kevin Lang & Sumon Majumdar, 2003. "The Pricing of Job Characteristics When Markets Do Not Clear: Theory and Implications," NBER Working Papers 9911, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Pollak, Robert A, 1969. "Conditional Demand Functions and Consumption Theory," The Quarterly Journal of Economics, MIT Press, vol. 83(1), pages 60-78, February. [Downloadable!] (restricted)
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  12. Johannesson, Magnus & Johansson, Per-Olov & Löfgren, Karl-Gustaf, 1997. "On the Value of Changes in Life Expectancy: Blips versus Parametric Changes," Working Paper Series in Economics and Finance 152, Stockholm School of Economics.
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  13. Ziliak, James P., 1998. "Does the choice of consumption measure matter? An application to the permanent-income hypothesis," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 201-216, February. [Downloadable!] (restricted)
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  23. Blomqvist, Ake, 2002. "Defining the value of a statistical life: a comment," Journal of Health Economics, Elsevier, vol. 21(1), pages 169-175, January. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Emre Ozdenoren & Stephen Salant & Dan Silverman, 2006. "Willpower and the Optimal Control of Visceral Urges," Economics Working Papers 0069, Institute for Advanced Study, School of Social Science. [Downloadable!]
    Other versions:
  2. Aldy, Joseph E. & Viscusi, W. Kip, 2007. "Age Differences in the Value of Statistical Life: Revealed Preference Evidence," Discussion Papers dp-07-05, Resources For the Future. [Downloadable!]
    Other versions:
  3. Thomas J. Kniesner & W. Kip Viscusi, 2005. "Value of a Statistical Life: Relative Position vs. Relative Age," American Economic Review, American Economic Association, vol. 95(2), pages 142-146, May. [Downloadable!]
  4. Jon Strand, 2005. "Individual and Household Values of Mortality Reductions with Intrahousehold Bargaining," Journal of Risk and Uncertainty, Springer, vol. 31(2), pages 217-236, September. [Downloadable!] (restricted)
  5. Bommier, Antoine & Villeneuve, Bertrand, 2008. "Risk Aversion and the Value of Risk to Life," MPRA Paper 11943, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  6. Anna Alberini & Maureen Cropper & Alan Krupnick & Nathalie Simon, 2006. "Willingness to pay for mortality risk reductions: Does latency matter?," Journal of Risk and Uncertainty, Springer, vol. 32(3), pages 231-245, May. [Downloadable!] (restricted)
    Other versions:
  7. Isaac Ehrlich & Yong Yin, 2005. "Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis," Journal of Risk and Uncertainty, Springer, vol. 31(2), pages 129-162, September. [Downloadable!] (restricted)
    Other versions:
  8. Perry Singleton, 2008. "The Effect of Disability Insurance on Health Investment: Evidence from the VA Disability Compensation Program," Center for Policy Research Working Papers 105, Center for Policy Research, Maxwell School, Syracuse University.
  9. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2007. "Pinning Down the Value of Statistical Life," IZA Discussion Papers 3107, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Viscusi, W. Kip & Aldy, Joseph, 2006. "Labor Market Estimates of the Senior Discount for the Value of Statistical Life," Discussion Papers dp-06-12, Resources For the Future. [Downloadable!]
    Other versions:
  11. Soma Bhattacharya & Anna Alberini & Maureen Cropper, 2007. "The value of mortality risk reductions in Delhi, India," Journal of Risk and Uncertainty, Springer, vol. 34(1), pages 21-47, February. [Downloadable!] (restricted)
    Other versions:
  12. W. Viscusi, 2008. "How to value a life," Journal of Economics and Finance, Springer, vol. 32(4), pages 311-323, October. [Downloadable!] (restricted)
  13. Per-Olov JOHANSSON, 2006. "On the definition and estimation of the value of a “statistical life”," Departemental Working Papers 2006-23, Department of Economics University of Milan Italy. [Downloadable!]
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