Hostname: page-component-cd9895bd7-hc48f Total loading time: 0 Render date: 2024-12-23T09:21:13.541Z Has data issue: false hasContentIssue false
  • English
  • Français

Risk Heterogeneity and the Value of Reducing Fatal Risks: Further Market-Based Evidence

Published online by Cambridge University Press:  19 January 2015

Ikuho Kochi  and
Laura O. Taylor
Ikuho Kochi
Affiliation:
Universidad Autónoma de Ciudad Juárez, México
Laura O. Taylor
Affiliation:
North Carolina State University
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 benefits associated with mortality risk reductions are a critical input for the benefit-cost analysis of economically significant federal regulations that affect health and safety. The dominant method of estimating the benefits of reducing mortality risks relies on labor markets to estimate the tradeoffs between workers’ wages and occupational risk. The past literature considers all labor market risks to be equivalent, failing to recognize the inherent heterogeneity in occupational hazards. In this research, heterogeneity in the value of reducing risks is explored within the labor market context. Unique location-specific risk data are developed for over 300 U.S. cities to separately identify the wage premiums for facing two disparate occupational risks: violent assault and motor vehicle accident risks. We find that ignoring the underlying heterogeneity in risks can lead to substantial over/under-statements of the benefits of reducing any one particular risk by up to 350%. As such, caution is urged for benefits transfer exercises that apply estimates of the marginal willingness to pay for reducing labor market accident risks to policies affecting very different risks, such as public safety or environmental risks.

Keywords

value of statistical liferisk characteristicsbenefit-cost analysis
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 2 , Issue 3 , 25 August 2011 , pp. 1 - 28
Copyright
Copyright © Society for Benefit-Cost Analysis 2011

References

Aldy, Joseph E. and Viscusi, W. Kip (2008), “Adjusting the value of a statistical life for age and cohort effects,” The Review of Economics and Statistics, 90 (3), 573-81.CrossRefGoogle Scholar
Ashenfelter, Orley and Greenstone, Michael (2004), “Using Mandated Speed Limits to Measure the Value of a Statistical Life,” Journal of Political Economy, Vol. 112(S1), Papers in Honor of Sherwin Rosen: A Supplement to Volume 112, S226-S267.CrossRefGoogle Scholar
Benjamin, Daniel K., Dougan, William R. and Buschena, David (2001), “Individuals' estimates of the risks of death: Part II-new evidence,” Journal of Risk and Uncertainty, 22 (1), 35-57.Google Scholar
Blomquist, Glenn C. (2004), “Self-Protection and Averting Behavior, Values of Statistical Lives, and Benefit Cost Analysis of Environmental Policy,” Review of Economics of the Household, 2 (1), 89-110.Google Scholar
Black, Dan A. and Kniesner, Thomas J. (2003), “On the measurement of job risk in hedonic wage models,” The Journal of Risk and Uncertainty, 27 (3), 205-20.Google Scholar
Bollinger, Christopher R. and Hirsch, Barry T. (2006), “Match bias from earnings imputation in the Current Population Survey: The case of imperfect matching,” Journal of Labor Economics, 24 (3), 483-519.CrossRefGoogle Scholar
Bosworth, Ryan, Cameron, Trudy Ann, and DeShazo, J.R. (2010), “Is an ounce of prevention worth a pound of cure? Comparing demand for public prevention and treatment policies,” Medical Decision Making, 30, E40-E56.Google Scholar
Cameron, Trudy Ann (2010), “Euthanizing the value of a statistical life,” Review of Environmental Economics and Policy, 4 (2), 161-78.Google Scholar
Cameron, Trudy Ann, DeShazo, J.R., and Johnson, Erica H. (2008), “Willingness to pay for health risk reductions: Differences by type of illness,” in Working paper.Google Scholar
Carlsson, Fredrik, Johansson-Stenman, Olof, and Martinsson, Peter (2004), “Is transport safety more valuable in the air?,” The Journal of Risk and Uncertainty, 28 (2), 147-63.Google Scholar
Chilton, Susan, Jones-Lee, Michael, Kiraly, Francis, Metcalf, Hugh, and Pang, Wei (2006), “Dread risks,” Journal of Risk and Uncertainty, 33(3), 165-82.Google Scholar
Cohen, Mark A., Rust, Roland T., Steen, Sara, and Tidd, Simon T. (2004), “Willingness-to-pay for crime control programs,” Criminology, 42(1), 89-110.Google Scholar
Cookson, Richard (2000), “Incorporating psycho-social considerations into health valuation: An experimental study,” Journal of Health Economics, 19 (3), 369-401.Google Scholar
Corso, Phaedra S., Hammitt, James K., and Graham, John D. (2001), “Valuing mortality-risk reduction: Using visual aids to improve the validity of contingent valuation,” The Journal of Risk and Uncertainty, 23 (2), 165-84.Google Scholar
DeLeire, Thomas and Timmins, Christopher (2007), “Roy Model Sorting and non-random selection in the valuation of a statistical life.” Department of Economics, Duke University.Google Scholar
Drudi, Dino (1997), “A century-long quest for meaningful and accurate occupational injury and illness statistics,” BLS Compensation and Working Conditions Winter 1997, 19-27.Google Scholar
Evans, Mary F. and Schaur, Georg (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), 260-70.Google Scholar
Evans, Mary F. and Kerry Smith, V. (2010), “Measuring how risk tradeoffs adjust with income,” Journal of Risk and Uncertainty, 40 (1), 33-55.Google Scholar
Hammitt, James K. and Graham, John D. (1999), “Willingness to pay for health protection: Inadequate sensitivity to probability?,” Journal of Risk and Uncertainty, 18(1), 33-62.Google Scholar
Hammitt, James K. and Haninger, Kevin (2010), “Valuing fatal risks to children and adults: Effects of disease, latency, and risk aversion,” Journal of Risk and Uncertainty, 40 (1), 57-83.Google Scholar
Hintermann, Beat, Alberini, Anna, and Markandya, Anil (2010), “Estimating the value of safety with labour market data: Are the results trustworthy?,” Applied Economics, 42 (9), 1085-100.Google Scholar
Jones-Lee, Michael, Hammerton, Max, and Philips, Peter (1985), “The value of safety: Results of a national sample survey,” Economic Journal, 95, 49-72.Google Scholar
Kenkel, Don (2003), “Using estimates of the value of a statistical life in evaluating consumer policy regulations,” Journal of Consumer policy, 26 (1), 1-21.Google Scholar
Knestaut, Andrew T. (1997), “Fatalities and injuries among truck and taxicab drivers,” BLS Compensation and Working Conditions, Fall 1997, 55-60.Google Scholar
Kniesner, Thomas J., Viscusi, W. Kip, and Woock, Christopher (2011), “The value of a statistical life: Evidence from panel data,” Center for Policy Research, 44.Google Scholar
Kniesner, Thomas J., Viscusi, W. Kip, and Ziliak, James P. (2010), “Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions,” Journal of Risk and Uncertainty, 40 (1), 15-31.CrossRefGoogle Scholar
Kochi, Ikuho, Hubbell, Bryan, and Kramer, Randall (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 (3), 385-406 Google Scholar
Ludwig, Jens and Cook, Philip J. (2001), “The benefits of reducing gun violence: Evidence from contingent-valuation survey data,” The Journal of Risk and Uncertainty, 22 (3), 207-26.Google Scholar
McDaniels, Timothy L., Kamlet, Mark S., and Fischer, Gregory W. (1992), “Risk perception and the value of safety,” Risk Analysis, 12 (4), 495-503.Google Scholar
McConnell, Kenneth E. (2006), “Chapter 7: Hedonic wage analysis,” in Environmental and Resource Valuation with Revealed Preferences: A Theoretical Guide to Empirical Models (The Economics of Non-Market Goods and Resources) Bockstael, Nancy E. and McConnell, Kenneth E., Eds.: Springer.Google Scholar
Mrozek, Janusz R. and Taylor, Laura O. (2002), “What determines the value of life? A meta-analysis,” Journal of Policy Analysis and Management, 21 (2), 253-70.CrossRefGoogle Scholar
Personick, Martin E. and Windau, Janice A. (1995), “Self-employed individuals fatally injured at work,” Monthly Labor Review, August 1995.Google Scholar
Persson, Ulf, Norinder, Anna, Hjalte, Krister, and Gralén, Katarina (2001), “The value of a statistical life in transport: Findings from a new contingent valuation study in Sweden,” The Journal of Risk and Uncertainty, 23 (2), 121-34.Google Scholar
Robinson, Lisa A. (2007), “How US government agencies value mortality risk reductions,” Review of Environmental Economics and Policy, 1 (2), 283-99.Google Scholar
Robinson, Lisa A., Hammitt, James K., Aldy, Joseph E., Krupnick, Alan, and Jennifer, Baxter (2010), “Valuing the risk of death from terrorist attacks,” Journal of Homeland Security and Emergency Management, 7 (1), 1-25.Google Scholar
Savage, I. (1993), “An empirical investigation into the effect of psychological perceptions on the willingness-to-pay to reduce risk,” Journal of Risk and Uncertainty, 6 (1), 75-90.Google Scholar
Scotton, Carol R. and Taylor, Laura O. (2011), “Valuing risk reductions: Incorporating risk heterogeneity into a revealed preference framework,” Resource and Energy Economics, 33 (2), 381-397.Google Scholar
Slovic, Paul, Fischhoff, Baruch, and Lichtenstein, Sarah (1980), “Facts and fears: understanding perceived risk,” in Societal Risk Assessment : How Safe is Safe Enough?, Schwing, Richard C. and Albers, Walter A. Jr., Eds. New York: Plenum Press.Google Scholar
Sunstein, Cass R. (1997), “Bad deaths,” Journal of Risk and Uncertainty, 14 (3), 259-82.CrossRefGoogle Scholar
U.S. Department of Transportation (2008), “Treatment of the Economic Value of a Statistical Life in Departmental Analyses,” in Memorandum. Washington D.C. Google Scholar
U.S. Environmental Protection Agency (1997), “The Benefits and Costs of the Clean Air Act, 1970 to 1990.” Washington D.C. Google Scholar
U.S. Environmental Protection Agency (1998), National Air Pollutant Emission Trends Update, 1970-1997,” EPA-454/E-98-007, U.S. Environmental Agency, Office of Air Quality Planning and Standards, Research Triangle Park, NC, December 1998.Google Scholar
U.S. Environmental Protection Agency Science Advisory Board (2000), “An SAB report on EPA's White Paper: Valuing the Benefits of Fatal Cancer Risk Reduction,” Washington D.C.: U.S.EPA. Google Scholar
U.S. Environmental Protection Agency Science Advisory Board (2005), “Regulatory Impact Analysis for the Final Clean Air Interstate Rule.” Washington D.C. Google Scholar
U.S. Office of Management and Budget (2003), “Draft 2003 Report to Congress on the Costs and Benefits of Federal Regulations; Notice.” Washington D.C. Google Scholar
Viscusi, W. Kip and Aldy, Joseph E. (2003), “The value of a statistical life: A critical review of market estimates throughout the world,” The Journal of Risk and Uncertainty, 27 (1), 5-76.Google Scholar
Viscusi, W. Kip and Aldy, Joseph E. (2007), “Labor market estimates of the senior discount for the value of statistical life,” Journal of Environmental Economics and Management, 53 (3), 377-92.Google Scholar