How to Value a Life
26 Pages Posted: 28 May 2008
Date Written: March 18, 2008
The tradeoff between money and small risks of death is the value of statistical life (VSL), which has become the standard for assessing the benefits of risk and environmental regulations. Labor market estimates of the VSL average about $7 million. This valuation amount rises with age and then declines, closely tracking the pattern of consumption over the life cycle. The VSL for those at age 60 is higher than for people in their 20s. Application of this methodology to assess the mortality costs to smokers indicates a personal mortality cost on the order of $200 per pack for men and $100 for women using a 3 percent discount rate, but based on smokers' rates of time preference the costs are reduced by about an order of magnitude.
Keywords: value of statistical life, mortality costs, smoking, job risks
JEL Classification: I18, J17, J18
Suggested Citation: Suggested Citation