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Income Elasticity and the Global Value of a Statistical Life

41 Pages Posted: 28 May 2017  

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

Clayton Masterman

Vanderbilt University - Law and Economics, Students

Date Written: May 10, 2017

Abstract

Countries throughout the world use estimates of the value of a statistical life (VSL) to monetize fatality risks in benefit-cost analyses. However, the vast majority of countries lack reliable revealed preference or stated preference estimates of the VSL. This article proposes that the best way to calculate a VSL for countries with insufficient or unreliable data is to transfer a base VSL from the United States calculated using labor market estimates from Census of Fatal Occupational Injuries data, coupled with adjustments for differences in income between the United States and the country of interest. This approach requires estimation of two critical inputs: a base U.S. VSL and the income elasticity of the VSL. Drawing upon previous meta-analyses that include adjustments for publication selection biases, we adopt a base VSL of $9.6 million. Based on a sample of 953 VSL estimates from 68 labor market studies of the VSL, we estimate the income elasticity of the VSL within the United States to be from 0.5 to 0.7 and to be just above 1.0 for non-U.S. countries. Quantile regression reveals that much of the disparity income elasticities is attributable to income differences between the United States and other countries, as the income elasticity increases for lower income populations. Using income classifications from the World Bank, we calculate average VSLs in lower income, lower-middle income, upper-middle income, and upper income countries to be $125,000, $380,000, $1.3 million, and $5.7 million, respectively. We also present VSL estimates for all 189 countries for which World Bank income data are available, yielding a VSL range from $104,000 to $23.2 million.

Keywords: Value of a statistical life, income elasticity, meta-analysis, publication selection bias

JEL Classification: I18, I12, K32, J17, J31

Suggested Citation

Viscusi, W. Kip and Masterman, Clayton, Income Elasticity and the Global Value of a Statistical Life (May 10, 2017). Vanderbilt Law Research Paper No. 17-29. Available at SSRN: https://ssrn.com/abstract=2975466 or http://dx.doi.org/10.2139/ssrn.2975466

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vanderbilt University - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

Clayton Masterman

Vanderbilt University - Law and Economics, Students ( email )

Nashville, TN
United States

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