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Adjusting the Value of a Statistical Life for Age and Cohort Effects

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Author Info
Aldy, Joseph E. () (Resources for the Future)
Viscusi, W. Kip

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Abstract

To resolve the theoretical ambiguity in the effect of age on the value of statistical life (VSL), this article uses a novel, age-dependent fatal risk measure to estimate age-specific hedonic wage regressions. VSL exhibits an inverted-U shaped relationship with age. In the year 2000 cross-section, workers’ VSL rises from $3.2 million (ages 18–24), to $9.9 million (35–44), and declines to $3.8 million (55–62). Controlling for birth-year cohort effects in a minimum distance estimator yields a peak VSL of $7.8 million at age 46 and flattens the VSL-age relationship. The value of statistical life-year also follows an inverted-U shape with age.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-06-19.

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Date of creation: 10 Apr 2006
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Handle: RePEc:rff:dpaper:dp-06-19

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Related research
Keywords: value of statistical life; job risks; hedonic wage regression; VSLY;

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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.:
  1. Rosen, Sherwin, 1988. " The Value of Changes in Life Expectancy," Journal of Risk and Uncertainty, Springer, vol. 1(3), pages 285-304, September.
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  2. Joseph E. Aldy & W. Kip Viscusi, 2004. "Age Variations in Workers' Value of Statistical Life," NBER Working Papers 10199, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. W. Kip Viscusi & Joseph E. Aldy, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," NBER Working Papers 9487, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. 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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  5. Cropper, Maureen L & Sussman, Frances G, 1988. "Families and the Economics of Risks to Life," American Economic Review, American Economic Association, vol. 78(1), pages 255-60, March. [Downloadable!] (restricted)
  6. V. Kerry Smith & Mary F. Evans & Hyun Kim & Donald H. Taylor, 2004. "Do the Near-Elderly Value Mortality Risks Differently?," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 423-429, 03. [Downloadable!] (restricted)
  7. Hersch, Joni, 1998. "Compensating Differentials for Gender-Specific Job Injury Risks," American Economic Review, American Economic Association, vol. 88(3), pages 598-627, June. [Downloadable!] (restricted)
  8. Altonji, Joseph G & Segal, Lewis M, 1996. "Small-Sample Bias in GMM Estimation of Covariance Structures," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 353-66, July.
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  9. W. Kip Viscusi, 2004. "The Value of Life: Estimates with Risks by Occupation and Industry," Economic Inquiry, Oxford University Press, vol. 42(1), pages 29-48, January. [Downloadable!] (restricted)
  10. Jones-Lee, M W & Hammerton, M & Philips, P R, 1985. "The Value of Safety: Results of a National Sample Survey," Economic Journal, Royal Economic Society, vol. 95(377), pages 49-72, March. [Downloadable!] (restricted)
  11. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-67, June. [Downloadable!] (restricted)
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  12. Isaac Ehrlich & Yong Yin, 2004. "Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis," NBER Working Papers 10759, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126. [Downloadable!] (restricted)
  14. W. Kip Viscusi & Joni Hersch, 2001. "Cigarette Smokers As Job Risk Takers," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 269-280, May. [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. Abou-Ali, Hala & El-Azony, Hesham & El-Laithy, Heba & Haughton, Jonathan & Khandker, Shahidur R., 2009. "Evaluating the impact of Egyptian social fund for development programs," Policy Research Working Paper Series 4993, The World Bank. [Downloadable!]
  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. 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:
  4. Svensson, Mikael, 2006. "The Value of a Statistical Life in Sweden Estimates from Two Studies using the "Certainty Approach" Calibration," Working Papers 2006:6, Örebro University, Swedish Business School, revised 25 Jul 2007. [Downloadable!]
  5. Andersson, Henrik, 2006. "Willingness to Pay for Road Safety and Estimates of the Risk of Death: Evidence from a Swedish Contingent Valuation Study," Working Papers 2006:5, Swedish National Road & Transport Research Institute (VTI).
  6. Mary F. Evans & V. Kerry Smith, 2008. "Complementarity and the Measurement of Individual Risk Tradeoffs: Accounting for Quantity and Quality of Life Effects," NBER Working Papers 13722, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Parry, Ian W.H. & Laxminarayan, Ramanan & West, Sarah E., 2006. "Fiscal and Externality Rationales for Alcohol Taxes," Discussion Papers dp-06-51, Resources For the Future. [Downloadable!]
  8. W. Viscusi, 2008. "How to value a life," Journal of Economics and Finance, Springer, vol. 32(4), pages 311-323, October. [Downloadable!] (restricted)
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