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Title:Using job changes to evaluate the bias of the value of a statistical life PDF Logo
Authors:Spengler, Hannes
Schaffner, Sandra
Issue Date:2007
Series/Report no.:Discussion papers // German Institute for Economic Research 713
Abstract:This paper presents a new approach to obtain unbiased estimates of the value of a statistical life (VSL) with labor market data. Investigating job changes, we combine the advantages of recent panel studies, which allow to control for unobserved heterogeneity of workers, and conventional cross-sectional estimations, which primarily exploit the variation of wage and risk between different jobs. We find a VSL of 6.1 million euros from pooled cross-sectional estimation, 1.9 million euros from the static first-differences panel model and 3.5 million euros from the job-changer specification. Thus, ignoring individual heterogeneity causes overestimates of the VSL, whereas identifying the wage-risk tradeoff not only by means of between job variation (job-changer model) but also on the basis of noisy variation on the job (panel models) may lead to underestimates of the VSL. Our results can be used to perform cost-benefit analyses of public projects aimed at reducing fatality risks, e.g., in the domains of health, environmental or traffic policy.
Subjects:Value of a statistical life (VSL)
compensating wage differentials
work accidents
job changes
JEL:I10
J17
J28
K00
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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