Statistical Analysis of Value-of-Life Estimates Using Hedonic Wage Method

Risk Management Chair, HEC Montreal Working Paper No. 02-01

30 Pages Posted: 6 Feb 2003

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Pierre-Carl Michaud

University of Quebec at Montreal (UQAM) - Department of Economics; Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE); RAND Corporation, Labor and Population; IZA Institute of Labor Economics; Netspar

Date Written: May 2002

Abstract

This research analyses the variability of value-of-life estimates. We find evidence that this variability may in large part be explained by differences in the methodologies used to estimate the value of life. Income elasticity for the value of life is found to be in the 1.07 to 1.72 interval, a result similar to that obtained by Miller (2000) and de Blaeij et al. (2000). We also analyze the relationship between the value of life and the initial probability of a fatal accident, often used in the literature as a proxy for the variation in the probability of death. We show that although the willingness to pay may increase with the probability of death, the value of life will decrease with this probability if the initial probability is less than one half. We draw conclusive evidence of such a relationship from a sample of 38 value-of-life estimates based on the hedonic-wage method.

Keywords: value-of-life, willingness to pay, probability of death, estimate, methodology

Suggested Citation

Dionne, Georges and Michaud, Pierre-Carl, Statistical Analysis of Value-of-Life Estimates Using Hedonic Wage Method (May 2002). Risk Management Chair, HEC Montreal Working Paper No. 02-01, Available at SSRN: https://ssrn.com/abstract=350942 or http://dx.doi.org/10.2139/ssrn.350942

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

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Pierre-Carl Michaud

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE) ( email )

Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada

RAND Corporation, Labor and Population ( email )

Santa Monica, CA 90407-2138
United States

IZA Institute of Labor Economics ( email )

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

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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