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Value of a Statistical Life: Relative Position vs. Relative Age

14 Pages Posted: 17 Feb 2005  

Thomas J. Kniesner

Syracuse University - Department of Economics; IZA Institute of Labor Economics

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

Date Written: January 2005

Abstract

This paper examines the influence on estimates of the value of statistical life (VSL) of the worker's relative position in the wage distribution and relative position in the life cycle. Whereas past work on relative position effects in the labor market have been based on illustrative hypothetical examples, this paper develops empirical tests using actual market behavior. To test for the effect of relative wage position, we use two different measures: the individual's wage rank in the state and the wage rank by gender in the state. Using the CPS coupled with constructed BLS fatality risk measures by industry and occupation group, we show that inclusion of relative position variables in a canonical wage equation reduces VSL estimates by 25-33%. This effect is the opposite of what the relative position theorists have hypothesized. In contrast, recognition of the worker's relative position within the life cycle raises VSL estimates by up to 20%, especially for older workers.

JEL Classification: J3, I1

Suggested Citation

Kniesner, Thomas J. and Viscusi, W. Kip, Value of a Statistical Life: Relative Position vs. Relative Age (January 2005). Harvard Law and Economics Discussion Paper No. 502. Available at SSRN: https://ssrn.com/abstract=668383 or http://dx.doi.org/10.2139/ssrn.668383

Thomas J. Kniesner

Syracuse University - Department of Economics ( email )

Syracuse, NY 13244-1020
United States
315-443-4589 (Phone)
315-443-1081 (Fax)

IZA Institute of Labor Economics

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

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

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