Valuing Life as an Asset, as a Statistic and at Gunpoint
59 Pages Posted: 9 Apr 2018
Date Written: April 4, 2018
The Human Capital (HK) and Statistical Life Values (VSL) differ sharply in their empirical pricing of a human life and lack a common theoretical background to justify these differences. We first contribute to the theory and measurement of life value by providing a unified framework to formally define and relate the Hicksian willingness to pay (WTP) to avoid changes in death risks, the HK and the VSL. Second, we use this setting to introduce an alternative life value calculated at Gunpoint (GPV), i.e. the WTP to avoid certain, instantaneous death. Third, we associate a flexible human capital model to the common framework to characterize the WTP and the three life valuations in closed-form. Fourth, our structural estimates of these solutions yield mean life values of 8.35 M$ (VSL), 421 K$ (HK) and 447 K$ (GPV). We confirm that the strong curvature of the WTP and the linear projection hypothesis of the VSL explain why the latter is much larger than other values.
Keywords: Value of Human Life, Human Capital, Value of Statistical Life, Hicksian Willingness to Pay, Equivalent Variation, Mortality, Structural Estimation
JEL Classification: J17, D15, G11
Suggested Citation: Suggested Citation