Abstract
This study uses the hedonic wage method to estimate the value of statistical life (VSL) in Chile and then extrapolates this value to different Latin American countries. The data are obtained from the National Socioeconomic Characterization Survey (Encuesta de Caracterización Socioeconómica Nacional, CASEN 2013), which includes information on socioeconomic and labor variables at the individual level. Records of fatal and nonfatal occupational risk in each economic sector are obtained from the Superintendency of Social Security (Superintendencia de Seguridad Social). The results of the best hedonic wage estimate for the Chilean case (which corrects for endogeneity and selection bias) show that the VSL is US$3.7 million, with a confidence interval of 95 percent ranging between US$3.4 million and US$4.0 million. A meta-analysis that relates the VSL to GDP per capita is conducted to extrapolate the findings to other Latin American countries, with average values ranging from US$0.01 million for Haiti to US$5.2 million for Puerto Rico.
Highlights
The value of statistical life (VSL) is the marginal willingness to pay for marginal risk reductions in a given context, but it does not correspond to the ex-post value of the saved lives
The most commonly used approaches to quantifying VSL are the revealed preference approach, typically known as the hedonic wage method, and the stated preference approach
Kniesner et al (2007) demonstrate how the use of the best available data and the best econometric practices can determine the estimated VSL in previous studies.2. This situation motivated the realization of the present study, which uses more updated data with more explanatory variables and new instrumental variables to provide new evidence to clarify if the VSL for Chile estimated with the hedonic wage method is significantly different from the value of other countries with similar GDPs per capita and if the result of the only previous study can be attributed to data and/or methodological problems
Summary
The value of statistical life (VSL) is the marginal willingness to pay for (or the marginal willingness to accept) marginal risk reductions in a given context (environmental pollution, road safety, and occupational safety, among others), but it does not correspond to the ex-post value of the saved lives. From an empirical perspective, Kniesner et al (2007) demonstrate how the use of the best available data (panel data and risk level with high disaggregation) and the best econometric practices can determine the estimated VSL in previous studies.2 This situation motivated the realization of the present study, which uses more updated data with more explanatory variables and new instrumental variables to provide new evidence to clarify if the VSL for Chile estimated with the hedonic wage method is significantly different from the value of other countries with similar GDPs per capita and if the result of the only previous study can be attributed to data and/or methodological problems.
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