Using Mandated Speed Limits to Measure the Value of a Statistical Life

48 Pages Posted: 18 Nov 2002

See all articles by Orley Ashenfelter

Orley Ashenfelter

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Michael Greenstone

University of Chicago - Department of Economics; Becker Friedman Institute for Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2002

Abstract

In 1987 the federal government permitted states to raise the speed limit on their rural interstate roads, but not on their urban interstate roads, from 55 mph to 65 mph for the first time in over a decade. Since the states that adopted the higher speed limit must have valued the travel hours they saved more than the fatalities incurred, this experiment provides a way to estimate an upper bound on the public's willingness to trade off wealth for a change in the probability of death. We find that the 65 mph limit increased speeds by approximately 3.5% (i.e., 2 mph), and increased fatality rates by roughly 35%. In the 21 states that raised the speed limit and for whom we have complete data, the estimates suggest that about 125,000 hours were saved per lost life.

Valuing the time saved at the average hourly wage implies that adopting states were willing to accept risks that resulted in a savings of $1.54 million (1997$) per fatality, with a sampling error that might be around one-third this value. Since this estimate is an upper bound, we set out a simple structural model that is identified by variability across the states in the probability of the adoption of increased speed limits that is consistent with this claim, but it provides estimates of the value of a statistical life that are very imprecise.

Keywords: Value of a Statistical Life, Speed Limits, Safety Risks, Value of Time

JEL Classification: J17, H43, I18, R4

Suggested Citation

Ashenfelter, Orley C. and Greenstone, Michael, Using Mandated Speed Limits to Measure the Value of a Statistical Life (September 2002). IZA Discussion Paper No. 571; FEEM Working Paper No. 65.2002. Available at SSRN: https://ssrn.com/abstract=331463 or http://dx.doi.org/10.2139/ssrn.331463

Orley C. Ashenfelter (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4040 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael Greenstone

University of Chicago - Department of Economics

1126 East 59th Street
Chicago, IL 60637
United States

Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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