Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-22T00:35:19.815Z Has data issue: false hasContentIssue false
  • English
  • Français

The Income Elasticity of the Value per Statistical Life: Transferring Estimates between High and Low Income Populations

Published online by Cambridge University Press:  07 June 2021

James K. Hammitt  and
Lisa A. Robinson
James K. Hammitt
Affiliation:
Harvard University (Center for Risk Analysis) and Toulouse School of Economics (LERNA-INRA)
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

The income elasticity of the value per statistical life (VSL) is an important parameter for policy analysis. Mortality risk reductions often dominate the quantified benefits of environmental and other policies, and estimates of their value are frequently transferred across countries with significantly different income levels. U.S. regulatory agencies typically assume that a 1.0 percent change in real income over time will lead to a 0.4 to 0.6 percent change in the VSL. While elasticities within this range are supported by substantial research, they appear nonsensical if applied to populations with significantly smaller incomes. When transferring values between high and lower income countries, analysts often instead assume an elasticity of 1.0, but the resulting VSL estimates appear large in comparison to income. Elasticities greater than 1.0 are supported by research on the relationship between long-term economic growth and the VSL, by cross-country comparisons, and by new research that estimates the VSL by income quantile. Caution is needed when applying these higher elasticities, however, because the resulting VSLs appear smaller than expected future earnings or consumption in some cases, contrary to theory. In addition to indicating the need for more research, this comparison suggests that, in the interim, VSL estimates should be bounded below by estimates of future income or consumption.

Keywords

value per statistical lifebenefit-cost analysisincome elasticitydeveloping countries
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 2 , Issue 1 , 03 January 2011 , pp. 1 - 29
Copyright
Copyright © Society for Benefit-Cost Analysis 2011

References

Alberini, A., Cropper, M., Krupnick, A., and Simon, N.. 2004. “Does the Value of a Statistical Life Vary with Age and Health Status? Evidence from the U.S. and Canada.” Journal of Environmental Economics and Management. 48(1), 769-792.CrossRefGoogle Scholar
Aldy, J.E., and Viscusi, W.K.. 2007. “Age Differences in the Value of Statistical Life: Revealed Preference Evidence.” Review of Environmental Economics and Policy. 1(2), 241-260.CrossRefGoogle Scholar
Bellavance, F., Dionne, G., and Lebeau, M.. 2009. “The Value of a Statistical Life: A Meta-Analysis with a Mixed Effects Regression Model.” Journal of Health Economics. 28, 444-464.CrossRefGoogle ScholarPubMed
Bergstrom, T. 1982. “When Is a Man’s Life Worth More than his Human Capital?” In The Value of Life and Safety. (Jones-Lee, M.W., ed.) Amsterdam: North-Holland.Google Scholar
Blumberg, K., Kebin, H., Yu, Z., Huan, L., and Yamaguchi, N.. 2006. Costs and Benefits of Reduced Sulfur Fuels in China. Washington, DC: International Council on Clean Transportation.Google Scholar
Bowland, B.J., and Beghin, J.C.. 2001. “Robust Estimates of Value of a Statistical Life for Developing Economies.” Journal of Policy Modeling. 23(4), 385-396.CrossRefGoogle Scholar
Costa, D.L., and Kahn, M.E.. 2004. “Changes in the Value of Life, 1940-1980.” Journal of Risk and Uncertainty. 29(2), 159-180.CrossRefGoogle Scholar
Corso, P.S., Hammitt, J.K., and Graham, J.D.. 2001. “Valuing Mortality-Risk Reduction: Using Visual Aids to Improve the Validity of Contingent Valuation.” Journal of Risk and Uncertainty. 23(2), 165-184.CrossRefGoogle Scholar
Cropper, M.L., et al. 2007. “SAB Advisory on EPA’s Issues in Valuing Mortality Risk Reduction.” Memorandum from the Chair, Science Advisory Board, and the Chair, Environmental Economics Advisory Committee, to EPA Administrator Stephen L. Johnson. EPA-SAB-08-001.Google Scholar
Cropper, M.L., and Sussman, F.G.. 1990. “Valuing Future Risks to Life.” Journal of Environmental Economics and Management. 19, 160-174.CrossRefGoogle Scholar
Drèze, J. 1962. “L’Utilité Sociale d’une Vie Humaine.” Revue Française de Recherche Opérationnelle. 6, 93-118.Google Scholar
Eeckhoudt, L.R., and Hammitt, J.K.. 2001. “Background Risks and the Value of Statistical Life.” Journal of Risk and Uncertainty. 23(3), 261-279.CrossRefGoogle Scholar
Ehrlich, I., and Yin, Y.. 2005. “Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis.” Journal of Risk and Uncertainty. 31(2), 129-162.CrossRefGoogle Scholar
Evans, M.F., and Schaur, G.. 2010. “A Quantile Estimation Approach to Identify Income and Age Variation in the Value of a Statistical Life.” Journal of Environmental Economics and Management. 59(3), 260-270.CrossRefGoogle Scholar
Evans, M.F., and Smith, V.K.. 2010. Measuring How Risk Trade-Offs Adjust with Income.” Journal of Risk and Uncertainty. 40, 33-55.CrossRefGoogle Scholar
Flores, N.E., and Carson, R.T.. 1997. “The Relationship between the Income Elasticities of Demand and Willingness to Pay.” Journal of Environmental Economics and Management. 33, 287-295.CrossRefGoogle Scholar
Grosse, S.D. 2003. “Appendix I: Productivity Loss Tables.” In Prevention Effectiveness: A Guide to Decision Analysis and Economic Evaluation. (Haddix, A.C., Teutsch, S.M., and Corso, P.S., eds.) New York: Oxford University Press.Google Scholar
Hammitt, J.K. 2000. “Valuing Mortality Risk: Theory and Practice.” Environmental Science and Technology. 34, 1396-1400.CrossRefGoogle Scholar
Hammitt, J.K. 2007. “Valuing Changes in Mortality Risk: Lives Saved versus Life Years Saved.” Review Of Environmental Economics and Policy. 1(2), 228-240.CrossRefGoogle Scholar
Hammitt, J.K., and Haninger, K.. 2010. “Valuing Fatal Risks to Children and Adults: Effects of Disease, Latency, and Risk Aversion.” Journal of Risk and Uncertainty. 40, 57-83.CrossRefGoogle Scholar
Hammitt, J.K., and Ibarrarán, M.E.. 2006. “The Economic Value of Fatal and Non-Fatal Occupational Risks in Mexico City using Actuarial- and Perceived-Risk Estimates.” Health Economics Letters. 15, 1329-1335.CrossRefGoogle ScholarPubMed
Hammitt, J.K., and Liu, J-T.. 2004. “Effects of Disease Type and Latency on the Value of Mortality Risk.” Journal of Risk and Uncertainty. 28, 73-95.CrossRefGoogle Scholar
Hammitt, J.K., Liu, J-T., and Liu, J-L.. 2000. “Survival is a Luxury Good: The Increasing Value of a Statistical Life.” Prepared for the NBER Summer Institute Workshop on Public Policy and the Environment.Google Scholar
Hammitt, J.K., and Zhou, Y.. 2006. “The Economic Value of Air-Pollution-Related Health Risks in China: A Contingent Valuation Study.” Environmental and Resource Economics. 33, 399-423.CrossRefGoogle Scholar
Industrial Economics, Incorporated. 1999. “Recommended Approach to Adjusting WTP Estimates to Reflect Changes in Real Income.” Memorandum from Kleckner, N. and Neumann, J.E. to DeMocker, J., U.S. Environmental Protection Agency.Google Scholar
Jenkins, G.P., Kuo, C-Y., and Ozbafli, A.. 2007. Cost-Benefit Analysis Case Study on Regulations to Lower the Level of Sulphur in Gasoline. Queen’s Economics Department Working Paper 1134. Prepared for Treasury Board, Government of Canada.Google Scholar
Johannsson, P.-O. 2002. “On the Definition and Age-Dependency of the Value of a Statistical Life.” Journal of Risk and Uncertainty. 25(2), 251-263.CrossRefGoogle Scholar
Jones-Lee, M.W. 1974. “The Value of Changes in the Probability of Death or Injury.” Journal of Political Economy. 99, 835-849.CrossRefGoogle Scholar
Kaplow, L. 2005. “The Value of a Statistical Life and the Coefficient of Relative Risk Aversion.” Journal of Risk and Uncertainty. 31(1), 23-34.CrossRefGoogle Scholar
Kochi, I., Hubbell, B., and Kramer, R.. 2006. “An Empirical Bayes Approach to Combining and Comparing Estimates of the Value of a Statistical Life for Environmental Policy Analysis.” Environmental and Resource Economics. 34, 385-406.CrossRefGoogle Scholar
Kniesner, T.J., Viscusi, W.K., and Ziliak, J.P.. 2010. “Policy Relevant Heterogenity in the Value of Statistical Life: New Evidence from Panel Data Quantile Regressions.” Journal of Risk and Uncertainty. 40, 16-31.CrossRefGoogle Scholar
Krupnick, A. 2007. “Mortality-risk Valuation and Age: Stated Preference Evidence.” Review of Environmental Economics and Policy. 1(2), 261-282.CrossRefGoogle Scholar
Larson, B.A., and Rosen, S.. 2002. “Understanding Household Demand for Indoor Air Pollution Control in Developing Countries.” Social Science & Medicine. 55, 571–584.CrossRefGoogle ScholarPubMed
Liu, J-T., Hammitt, J.K., and Liu, J-L.. 1997. “Estimated Hedonic Wage Function and Value of Life in a Developing Country.” Economic Letters. 57(3), 353-358.CrossRefGoogle Scholar
Lvovsky, K., Hughes, G., Maddison, D., Ostro, B., and Pearce, D.. 2000. Environmental Costs of Fossil Fuels: A Rapid Assessment Method with Application to Six Cities. The World Bank Environment Department, Pollution Management Series, Paper Number 78.Google Scholar
Miller, T.R. 2000. “Variations Between Countries in Values of Statistical Life.” Journal of Transport Economics and Safety. 34(2), 169-188.Google Scholar
Mrozek, J.R., and Taylor, L.O. 2002. “What Determines the Value of Life? A Meta-Analysis.” Journal of Policy Analysis and Management. 21(2), 253-270.CrossRefGoogle Scholar
Robinson, L.A. 2008. Valuing Mortality Risk Reductions in Homeland Security Regulatory Analyses. Prepared for U.S. Customs and Border Protection, Department of Homeland Security, under subcontract to Industrial Economics, Incorporated.Google Scholar
Robinson, L.A., and Hammitt, J.K.. 2009. The Value of Reducing Air Pollution Risks in Sub-Saharan Africa. Prepared for the World Bank under subcontract to ICF International.Google Scholar
Robinson, L.A., and Hammitt, J.K.. 2010. “Valuing Health and Longevity in Regulatory Analysis: Current Issues and Challenges.” Jerusalem Papers in Regulation and Governance, Working Paper No. 4. Google Scholar
Robinson, L.A., Hammitt, J.K., Aldy, J.E., Krupnick, A., and Baxter, J.. 2010. “Valuing the Risk of Death from Terrorist Attacks.” Journal of Homeland Security and Emergency Management. 7(1), Art. 14.CrossRefGoogle Scholar
Schelling, T. 1968. “The Life You Save May Be Your Own.” In Problems in Public Expenditure Analysis. (Chase, S.B. Jr., ed.) Washington, D.C.: Brookings Institution.Google Scholar
Shephard, D.S., and Zeckhauser, R.J.. 1982. “Life Cycle Consumption and Willingness to Pay for Increased Survival.” The Value of Life and Safety. (Jones-Lee, M.W., ed.) Amsterdam: North-Holland. pp. 95-141.Google Scholar
Shephard, D.S., and Zeckhauser, R.J.. 1984. “Survival versus Consumption.” Management Science. 30(4), 423-439.CrossRefGoogle Scholar
Stevens, G., Wilson, A., and Hammitt, J.K.. 2005. “A Benefit-Cost Analysis of Retrofitting Diesel Vehicles with Particulate Filters in the Mexico City Metropolitan Area.” Risk Analysis. 25(4), 883-899.CrossRefGoogle ScholarPubMed
U.S. Census Bureau. 2009. Statistical Abstract of the United States: 2010 (129th Edition). Google Scholar
U.S. Coast Guard, U.S. Department of Homeland Security. 2008a. Implementation of the 1995 Amendments to the International Convention on Standards of Training, Certification, and Watchkeeping for Seafarers, 1978, Preliminary Regulatory Analysis and Initial Regulatory Flexibility Analysis. USCG-2004-17914.Google Scholar
U.S. Coast Guard, U.S. Department of Homeland Security. 2008b. Vessel Requirements for Notices of Arrival and Departure and Automatic Identification System, Regulatory Analysis and Initial Regulatory Flexibility Analysis. USCG-2005-21869.Google Scholar
U.S. Department of Transportation (DOT). 2009. “Treatment of the Economic Value of a Statistical Life in Departmental Analyses—2009 Annual Revision.” Memorandum to Secretarial Officers and Modal Administrators from J. Szabat, Deputy Assistant Secretary for Transportation Policy, and L. Knapp, Acting General Counsel.Google Scholar
U.S. Department of Transportation (DOT), National Highway Traffic Safety Administration. 2007. Final Regulatory Impact Analysis, FMVSS No. 126: Electronic Stability Control Systems. Google Scholar
U.S. Environmental Protection Agency (EPA). 1997. The Benefits and Costs of the Clean Air Act, 1970 to 1990. EPA 410-R-97-002.Google Scholar
U.S. Environmental Protection Agency (EPA). 1999. The Benefits and Costs of the Clean Air Act, 1990 to 2010. EPA 410-R-99-001.Google Scholar
U.S. Environmental Protection Agency (EPA). 2000. Guidelines for Preparing Economic Analyses. EPA 240-R-00-003.Google Scholar
U.S. Environmental Protection Agency (EPA). 2006. Regulatory Impact Analysis for the National Ambient Air Quality Standards for Particle Pollution. Google Scholar
U.S. Food and Drug Administration (FDA). 2003. “Food Labeling; Trans Fatty Acids in Nutrition Labeling; Consumer Research to Consider Nutrient Content and Health Claims and Possible Footnote or Disclosure Statements; Final Rule and Proposed Rule.” Federal Register. 68(133), 41434-41506.Google Scholar
U.S. Office of Management and Budget (OMB). 2003. Circular A-4, Regulatory Analysis.Google Scholar
Viscusi, W.K. 1992. Fatal Trade-Offs: Public and Private Responsibilities for Risk. New York: Oxford University Press.Google Scholar
Viscusi, W.K. 1993. “The Value of Risks to Life and Health.” Journal of Economic Literature. 31, 1912-1946.Google Scholar
Viscusi, W.K., and Aldy, J.E.. 2003. “The Value of a Statistical Life: A Critical Review of Market Estimates Throughout the World.” Journal Of Risk And Uncertainty. 27(1), 5-76.CrossRefGoogle Scholar
Viscusi, W.K. 2004. “The Value of Life: Estimates with Risks by Occupation and Industry.” Economic Inquiry. 42(1), 29-48.CrossRefGoogle Scholar
Wang, H., and Mullahy, J.. 2006. “Willingness to Pay for Reducing Fatal Risk by Improving Air Quality: A Contingent Valuation Study in Chongqing, China.” Science of the Total Environment. 367, 50-57.CrossRefGoogle ScholarPubMed
World Bank. 2002a. Thailand Environment Monitor. Washington, DC: The World Bank.Google Scholar
World Bank. 2002b. Philippines Environment Monitor. Washington, DC: The World Bank.Google Scholar
World Bank. 2002c. Improving Air Quality in Metropolitan Mexico City. Washington, DC: The World Bank.Google Scholar
World Bank. 2006. Pakistan Strategic Country Environmental Assessment. Washington, DC: The World Bank. Report No. 36946-PK.Google Scholar
World Bank. 2008. Global Purchasing Power Parities and Real Expenditures. Washington, DC: The World Bank.Google Scholar