The heterogeneity of the value of statistical life: Introduction and overview

Abstract

The refinement in worker fatality risk data used in hedonic wage studies and evidence from new stated preference studies have facilitated the exploration of the heterogeneity of the value of statistical life (VSL). Although the median VSL estimate for workers is $7-$8 million, the VSL varies considerably within the worker population. New estimates of the income elasticity of VSL are 1.0 or above, which are consistent with theoretical models linking VSL to the coefficient of relative risk aversion. The specific relationship between VSL and risk aversion is, however, more complex than previously understood. Age differences in VSL are substantial, with young children being accorded especially high VSL amounts. The public's willingness to pay to reduce risks is reduced if those being protected are perceived as being blameworthy due to their responsibility for contributing to the risk.Keywords Value of statistical life . Fatality risk . VSL . Income elasticity . Blame . Children JEL Classification I10 . J17 . J28 . K00 . C23The value of statistical life (VSL) is not a natural constant. Individuals' risk-money tradeoffs vary across the population and also vary over time for particular individuals as their age and economic circumstances change. The heterogeneity of VSL has become more prominent both in terms of economics research and risk policy. Much of the research on the heterogeneity of VSL has been stimulated by the J Risk Uncertain (2010) 40:1-13

Mortality-risk valuation, age and cause of death: out-of-hospital cardiac arrest

“…Heterogeneous value of life is an extremely sensitive issue and in the US there have been legislation proposals against reduction of VSL values based on individual heterogeneity (Viscusi, 2010). Empirically it has been shown that heterogeneity of VSL regarding various ages is substantial, and international practices have often been to decrease VSL with age, i.e.…”

“…Empirically it has been shown that heterogeneity of VSL regarding various ages is substantial, and international practices have often been to decrease VSL with age, i.e. a 'senior death discount' (Viscusi, 2010;Aldy and Viscusi, 2007;Krupnick, 2007). 1 On the other hand, this policy has also been argued not to be supported by theoretical or empirical findings (Krupnick, 2007;Evans and Smith, 2006).…”

Euthanizing the Value of a Statistical Life

“…23 Differentiated VSLs (Individuation) and Equity Assessment Sunstein (2004) makes a persuasive case for the individuation of WTP estimates-that WTP should be differentiated to reflect differences in risks and in affected populations. Recent evidence concerning this heterogeneity in WTP is presented in a special issue of the Journal of Risk and Uncertainty (see Viscusi 2010).…”

“…A very thorough and detailed description and history of the EPA's VSL numbers and recent controversies is provided in Viscusi (2009a). See also comments by Carruthers (2009), Fourcade (2009), and Robinson (2009), and a reply by Viscusi (2009b). 4 In fact, different offices at EPA use different VSL estimates for different policies.…”

Principles and standards for benefit–cost analysis of public health preparedness and pandemic mitigation programs

“…A related concept is the "value of a statistical life year" (VSLY), or a VSL estimate which reflects remaining life expectancy by dividing the VSL by the discounted expected number of life years remaining (Robinson 2007). This approach assumes that VSLs are proportional to remaining life expectancy, an assumption not grounded in theory and which has not been borne out by empirical studies (Aldy and Viscusi 2007,Krupnick 2007,Viscusi 2010.…”