[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/126750.html
   My bibliography  Save this paper

Is Survival a Luxury Good? Income Elasticity of the Value per Statistical Life

Author

Listed:
  • Hammitt, James K.
  • Liu, Jin-Tan
  • Liu, Jin-Long
Abstract
The value of a change in mortality risk is conventionally described by the marginal rate of substitution between income and mortality risk—the value per statistical life (VSL). The income elasticity of VSL is important for estimating how the value of mortality risk varies with time (for evaluating programs with long-lived effects) and across populations with different income levels (for evaluating programs with international consequences). Previous estimates of income elasticity based on meta-analysis of wage-differential studies and cross-sectional comparisons in stated-preference studies suggest values between about one-half and one. We present new estimates based on a 16-year series of wage-differential estimates in Taiwan. Between 1982 and 1997, estimated VSL increased by a factor of five while household labor earnings increased by 60 percent, per capita GDP increased two-and-a-half fold, and the occupational fatality rate in manufacturing and service industries decreased by half. Comparing the growth of VSL with that of household income implies the income elasticity is between about two and five but this estimate may be biased by the endogeneity of VSL, which is affected by workers’ job choices. Using a two-stage approach to control for endogeneity yields estimates of the income elasticity of VSL between two-thirds and one, consistent with estimates from other approaches.

Suggested Citation

  • Hammitt, James K. & Liu, Jin-Tan & Liu, Jin-Long, 2022. "Is Survival a Luxury Good? Income Elasticity of the Value per Statistical Life," TSE Working Papers 22-1319, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:126750
    as

    Download full text from publisher

    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2022/wp_tse_1319.pdf
    File Function: Full Text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Aldy & W. Kip Viscusi, 2008. "Adjusting the Value of a Statistical Life for Age and Cohort Effects," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 573-581, August.
    2. Dora L. Costa & Matthew E. Kahn, 2004. "Changes in the Value of Life, 1940--1980," Journal of Risk and Uncertainty, Springer, vol. 29(2), pages 159-180, September.
    3. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 60-109, February.
    4. Thomas Kniesner & W. Viscusi & James Ziliak, 2010. "Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 15-31, February.
    5. Corso, Phaedra S & Hammitt, James K & Graham, John D, 2001. "Valuing Mortality-Risk Reduction: Using Visual Aids to Improve the Validity of Contingent Valuation," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 165-184, September.
    6. Levon Barseghyan & Francesca Molinari & Ted O'Donoghue & Joshua C. Teitelbaum, 2018. "Estimating Risk Preferences in the Field," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 501-564, June.
    7. Viscusi, W. Kip & Moore, Michael J., 1989. "Rates of time preference and valuations of the duration of life," Journal of Public Economics, Elsevier, vol. 38(3), pages 297-317, April.
    8. Hammitt James K. & Robinson Lisa A, 2011. "The Income Elasticity of the Value per Statistical Life: Transferring Estimates between High and Low Income Populations," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(1), pages 1-29, January.
    9. Mary Evans & V. Smith, 2010. "Measuring how risk tradeoffs adjust with income," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 33-55, February.
    10. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    11. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2002. "Identifying Hedonic Models," American Economic Review, American Economic Association, vol. 92(2), pages 304-309, May.
    12. An, Mark Y. & Roberto Ayala, 1995. "A Mixture Model of Willingness to Pay Distributions," Working Papers 95-21, Duke University, Department of Economics.
    13. Louis Kaplow, 2005. "The Value of a Statistical Life and the Coefficient of Relative Risk Aversion," Journal of Risk and Uncertainty, Springer, vol. 31(1), pages 23-34, July.
    14. Viscusi, W. Kip & Masterman, Clayton J., 2017. "Income Elasticities and Global Values of a Statistical Life," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 8(2), pages 226-250, July.
    15. W. Kip Viscusi, 2004. "The Value of Life: Estimates with Risks by Occupation and Industry," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 29-48, January.
    16. Flores, Nicholas E. & Carson, Richard T., 1997. "The Relationship between the Income Elasticities of Demand and Willingness to Pay," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 287-295, July.
    17. Viscusi, W Kip & O'Connor, Charles J, 1984. "Adaptive Responses to Chemical Labeling: Are Workers Bayesian Decision Makers?," American Economic Review, American Economic Association, vol. 74(5), pages 942-956, December.
    18. James Hammitt & Kevin Haninger, 2010. "Valuing fatal risks to children and adults: Effects of disease, latency, and risk aversion," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 57-83, February.
    19. Young, Alwyn, 2022. "Consistency without Inference: Instrumental Variables in Practical Application," European Economic Review, Elsevier, vol. 147(C).
    20. An, Mark Yuying, 1996. "Semiparametric Estimation of Willingness to Pay Distributions," Working Papers 96-20, Duke University, Department of Economics.
    21. Aldy, Joseph, 2019. "Birds of a Feather: Estimating the Value of Statistical Life from Dual-Earner Families," Working Paper Series rwp19-013, Harvard University, John F. Kennedy School of Government.
    22. Liu, Jin-Tan & Hammitt, James K. & Liu, Jin-Long, 1997. "Estimated hedonic wage function and value of life in a developing country," Economics Letters, Elsevier, vol. 57(3), pages 353-358, December.
    23. Joseph E. Aldy, 2019. "Birds of a feather: Estimating the value of statistical life from dual-earner families," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 187-205, June.
    24. Alberini, Anna & Cropper, Maureen & Krupnick, Alan & Simon, N.B.Nathalie B., 2004. "Does the value of a statistical life vary with age and health status? Evidence from the US and Canada," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 769-792, July.
    25. Eeckhoudt, Louis R & Hammitt, James K, 2001. "Background Risks and the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 261-279, November.
    26. James K. Hammitt & Fangli Geng & Xiaoqi Guo & Chris P. Nielsen, 2019. "Valuing mortality risk in China: Comparing stated-preference estimates from 2005 and 2016," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 167-186, June.
    27. Palmquist, Raymond B, 1984. "Estimating the Demand for the Characteristics of Housing," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 394-404, August.
    28. Hammitt James K. & Robinson Lisa A, 2011. "The Income Elasticity of the Value per Statistical Life: Transferring Estimates between High and Low Income Populations," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(1), pages 1-29, January.
    29. W. Kip Viscusi & Clayton Masterman, 2017. "Anchoring biases in international estimates of the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 54(2), pages 103-128, April.
    30. Cropper, Maureen L. & Guttikunda, Sarath & Jawahar, Puja & Lazri, Zachary & Malik, Kabir & Song, Xiao-Peng & Yao, Xinlu, 2019. "Applying Benefit-Cost Analysis to Air Pollution Control in the Indian Power Sector," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 10(S1), pages 185-205, April.
    31. Laura Pilossoph & Shu Lin Wee, 2021. "Household Search and the Marital Wage Premium," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 55-109, October.
    32. Young, Alwyn, 2022. "Consistency without inference: instrumental variables in practical application," LSE Research Online Documents on Economics 115011, London School of Economics and Political Science, LSE Library.
    33. Milton C. Weinstein & Donald S. Shepard & Joseph S. Pliskin, 1980. "The Economic Value of Changing Mortality Probabilities: A Decision-Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 373-396.
    34. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
    35. Masterman, Clayton J. & Viscusi, W. Kip, 2018. "The Income Elasticity of Global Values of a Statistical Life: Stated Preference Evidence," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 9(3), pages 407-434, October.
    36. Henrik Lindhjem & Ståle Navrud & Nils Axel Braathen & Vincent Biausque, 2011. "Valuing Mortality Risk Reductions from Environmental, Transport, and Health Policies: A Global Meta‐Analysis of Stated Preference Studies," Risk Analysis, John Wiley & Sons, vol. 31(9), pages 1381-1407, September.
    37. repec:reg:rpubli:282 is not listed on IDEAS
    38. Moore, Michael J. & Viscusi, W. Kip, 1990. "Discounting environmental health risks: New evidence and policy implications," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 51-62, March.
    39. Joseph E. Aldy, 2019. "Birds of a Feather: Estimating the Value of Statistical Life from Dual-Earner Families," NBER Working Papers 25708, National Bureau of Economic Research, Inc.
    40. Pratt, John W & Zeckhauser, Richard J, 1996. "Willingness to Pay and the Distribution of Risk and Wealth," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 747-763, August.
    41. Hoffmann, Sandra & Krupnick, Alan & Qin, Ping, 2017. "Building a Set of Internationally Comparable Value of Statistical Life Studies: Estimates of Chinese Willingness to Pay to Reduce Mortality Risk," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 8(2), pages 251-289, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James K. Hammitt, 2020. "Valuing mortality risk in the time of COVID-19," Journal of Risk and Uncertainty, Springer, vol. 61(2), pages 129-154, October.
    2. Thomas J. Kniesner & W. Kip Viscusi, 2023. "Compensating Differentials for Occupational Health and Safety Risks: Implications of Recent Evidence," Research in Labor Economics, in: 50th Celebratory Volume, volume 50, pages 83-116, Emerald Group Publishing Limited.
    3. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    4. Je-Liang Liou, 2019. "Effect of Income Heterogeneity on Valuation of Mortality Risk in Taiwan: An Application of Unconditional Quantile Regression Method," IJERPH, MDPI, vol. 16(9), pages 1-15, May.
    5. Hammitt, James K. & Robinson, Lisa A., 2011. "The Income Elasticity of the Value per Statistical Life: Transferring Estimates between High and Low Income Populations," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 2(1), pages 1-29, January.
    6. Lisa A. Robinson & James K. Hammitt, 2016. "Valuing Reductions in Fatal Illness Risks: Implications of Recent Research," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 1039-1052, August.
    7. James K. Hammitt & Fangli Geng & Xiaoqi Guo & Chris P. Nielsen, 2019. "Valuing mortality risk in China: Comparing stated-preference estimates from 2005 and 2016," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 167-186, June.
    8. Maureen Cropper & James K. Hammitt & Lisa A. Robinson, 2011. "Valuing Mortality Risk Reductions: Progress and Challenges," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 313-336, October.
    9. Henry A. Roman & James K. Hammitt & Tyra L. Walsh & David M. Stieb, 2012. "Expert Elicitation of the Value per Statistical Life in an Air Pollution Context," Risk Analysis, John Wiley & Sons, vol. 32(12), pages 2133-2151, December.
    10. Henrik Andersson & James Hammitt & Gunnar Lindberg & Kristian Sundström, 2013. "Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(3), pages 437-456, November.
    11. Patrick Carlin & Brian E. Dixon & Kosali I. Simon & Ryan Sullivan & Coady Wing, 2022. "How Undervalued is the Covid-19 Vaccine? Evidence from Discrete Choice Experiments and VSL Benchmarks," NBER Working Papers 30118, National Bureau of Economic Research, Inc.
    12. Marcela V. Parada‐Contzen, 2019. "The Value of a Statistical Life for Risk‐Averse and Risk‐Seeking Individuals," Risk Analysis, John Wiley & Sons, vol. 39(11), pages 2369-2390, November.
    13. Bellavance, Franois & Dionne, Georges & Lebeau, Martin, 2009. "The value of a statistical life: A meta-analysis with a mixed effects regression model," Journal of Health Economics, Elsevier, vol. 28(2), pages 444-464, March.
    14. Lisa A. Robinson & James K. Hammitt, 2011. "Behavioral Economics and Regulatory Analysis," Risk Analysis, John Wiley & Sons, vol. 31(9), pages 1408-1422, September.
    15. Anna Alberini & Milan Ščasný, 2021. "On the validity of the estimates of the VSL from contingent valuation: Evidence from the Czech Republic," Journal of Risk and Uncertainty, Springer, vol. 62(1), pages 55-87, February.
    16. Cameron, Trudy Ann & DeShazo, J.R., 2013. "Demand for health risk reductions," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 87-109.
    17. James K. Hammitt & Peter Morfeld & Jouni T. Tuomisto & Thomas C. Erren, 2020. "Premature Deaths, Statistical Lives, and Years of Life Lost: Identification, Quantification, and Valuation of Mortality Risks," Risk Analysis, John Wiley & Sons, vol. 40(4), pages 674-695, April.
    18. Henrik Andersson & James K. Hammitt & Kristian Sundström, 2015. "Willingness to Pay and QALYs: What Can We Learn about Valuing Foodborne Risk?," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(3), pages 727-752, September.
    19. Henrik Andersson, 2008. "Willingness to Pay for Car Safety: Evidence from Sweden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(4), pages 579-594, December.
    20. Lisa A. Robinson & James K. Hammitt, 2013. "Behavioral economics and the conduct of benefit–cost analysis: towards principles and standards," Chapters, in: Scott O. Farrow & Richard Zerbe, Jr. (ed.), Principles and Standards for Benefit–Cost Analysis, chapter 10, pages 317-363, Edward Elgar Publishing.

    More about this item

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:126750. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.