The Value of a Statistical Life for Risk‐Averse and Risk‐Seeking Individuals

Abstract

This article estimates the value of a statistical life (VSL) for Chile under the hedonic wage method while accounting for individual risk preferences. Two alternative measures of risk aversion are used. First, risk aversion is directly measured using survey measures of preferences over hypothetical gambles, and second, over observed individual behaviors that may proxy for risk preferences, such as smoking status, are used. I reconcile the results with a theoretical model of economic behavior that predicts how the wage‐risk tradeoff changes as risk aversion differs across individuals. The VSL estimates range between 0.61 and 8.68 million dollars. The results using smoking behavior as a proxy for risk attitudes are consistent with previous findings. However, directly measuring risk aversion corrects the wage‐risk tradeoff estimation bias in the opposite direction. The results are robust to other observed measures of risk aversion such as drinking behavior and stock investments. Results suggest that, consistent with the literature that connects smoking behavior with labor market outcomes, smoking status could be capturing poor health productivity effect in addition to purely risk preferences.

Gender, family status and health characteristics: Understanding retirement inequalities in the Chilean pension model

“…There is evidence suggesting that individuals' risk aversion levels change over time (Spivey 2010;Sahm 2012;Parada-Contzen 2019), which is consistent with the theoretical models on risk aversion throughout the life cycle (Bommier and Rochet 2006). The evolving nature of risk aversion is important for the design of public policy, as policymakers should consider how the environment…”

Género, situación familiar y características de salud. Análisis de las desigualdades en el sistema chileno de pensiones

“…Hay evidencias de que los niveles de aversión al riesgo de los individuos cambian con el tiempo (Spivey 2010;Sahm 2012;Parada-Contzen 2019), lo que concuerda con los modelos teóricos sobre la aversión al riesgo a lo largo del ciclo vital (Bommier y Rochet 2006). La naturaleza evolutiva de la aversión al riesgo es importante para el diseño de las políticas públicas, ya que los responsables políticos deben tener en cuenta la influencia del entorno en las preferencias de riesgo de los individuos y en sus decisiones, así como la interacción de las políticas públicas con las preferencias de los individuos (Sahm 2012;Schildberg-Hörisch 2018).…”

The Value of Environment Health Risks and Wage Compensation: Evidence from Selected Industries of Punjab, Pakistan

“…Cronbach Alpha (0.749) reliability test of the questionnaire assures that the conclusions obtained through analysis and data collection methodologies are consistent. According to previous research Hersch (1998), Shanmugam (2001), Aldy and Viscussi (2003), Black and Kniesner (2003), Madheshwaran (2004), Hammitt and Ibarraran (2006), Kniesner et al (2010), Viscusi (2014), Parada-Contzen (2019), the hedonic wage model incorporates variables such as human capital, job characteristics, working conditions, and perceptions of various environmental health risks.…”