Economic Valuation of Mortality Risk Reduction: Assessing the State of the Art for Policy Applications

Disclaimer Although the information in this document has been funded in part by the United States Environmental Protection Agency under Contract # 68-W6-0055 to Stratus Consulting Inc., it may not necessarily reflect the views of the Agency and no official endorsement should be inferred. Summarization Dr. Smith described their joint research as a traditional analysis of the job risk/wage tradeoffs underlying the estimation of the value of a statistical life, but with a new data set, the Health and Retirement Survey. These data have not been used for this purpose in the past. The Health and Retirement Survey (HRS) is a survey of individuals who were between 51 and 61 in 1992, and their spouses or primary partners in that year. While the individuals who were recruited into the HRS sample were between 51 and 61 in 1992, their spouses or partners span a wider age range. The Smith et al. study derived estimates of the value of a statistical life from a traditional hedonic wage model, estimated first with the responses of individuals who were surveyed in 1992 (wave 1), and then with the responses of individuals surveyed in 1994 (wave 2). Dr. Smith initially presented the results developed using a simple wage hedonic model, in which the log of wage is a function of BLS job risk, gender, race, years of education, and occupation categories. Although the bulk of the individuals in both the wave 1 and wave 2 samples were between 51 and 60 (because of the nature of the HRS), the age of individuals in their sample ranged from 26 to over 71, because it included the partners of the individuals recruited into the HRS sample. Applying the simple wage model only to men working at an hourly wage in wave 1, the VSL estimate they developed was $6.5 million in 1999 dollars (p-value = 0.032). Specializing this estimate to all men in wave 1, the implied VSL from this wage model is $5.3 million (p-value = 0.123). The corresponding VSLs for wave 2 are $6.1 million (0.025) and $6.6 million (0.048), respectively. Thus, both the data and the model framework provide benchmark results that correspond well with the literature on VSLs. Dr. Smith noted that the HRS has a number of interesting features in the survey, one of which is that it has very detailed health records. Another interesting feature is a question that tried …