The Value of a Statistical Life: Evidence from Panel Data
Thomas J. Kniesner
Syracuse University - Department of Economics; Institute for the Study of Labor (IZA)
W. Kip Viscusi
Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics
James P. Ziliak
University of Kentucky - Department of Economics
March 1, 2010
Syracuse University Center for Policy Research Working Paper No. 122
Our research addresses fundamental long-standing concerns in the compensating wage differentials literature and its public policy implications: the econometric properties of estimates of the value of statistical life (VSL) and the wide range of such estimates from about $0 to almost $30 million. Here we address most of the prominent econometric issues by applying panel data, a new and more accurate fatality risk measure, and systematic application of panel data estimators. Controlling for measurement error, endogeneity, latent individual heterogeneity that may be correlated with the regressors, state dependence, and sample composition yields an estimated value of a statistical life of about $7 million-$12 million, which we show can clarify greatly the cost-effectiveness of regulatory decisions. We show that probably the most important econometric issue is controlling for latent heterogeneity; less important is how one does it.
Number of Pages in PDF File: 41
Keywords: VSL, panel data, fixed effects, random effects, long-differences, PSID
JEL Classification: C23, I10, J17, J28, K00working papers series
Date posted: April 12, 2011
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