Abstract
Countries throughout the world use estimates of the value of a statistical life (VSL) to monetize fatality risks in benefit-cost analyses. However, the vast majority of countries lack reliable revealed preference or stated preference estimates of the VSL. This article proposes that the best way to calculate a population-average VSL for countries with insufficient or unreliable data is to transfer a base VSL from the United States calculated using labor market estimates from Census of Fatal Occupational Injuries data, coupled with adjustments for differences in income between the United States and the country of interest. This approach requires estimation of two critical inputs: a base U.S. VSL and the income elasticity of the VSL. Drawing upon previous meta-analyses that include adjustments for publication selection biases, we adopt a base VSL of $9.6 million. We utilize a sample of 953 VSL estimates from 68 labor market studies of the VSL covering fourteen lower-middle income to high income nations. We estimate the income elasticity of the VSL within the United States to be from 0.5 to 0.7 and to be just above 1.0 for non-U.S. countries. Quantile regression reveals that much of the disparity in income elasticities is attributable to income differences between the United States and other countries, as the income elasticity increases for lower income populations. Using income classifications from the World Bank, we calculate average VSLs in lower income, lower-middle income, upper-middle income, and upper income countries to be $107,000, $420,000, $1.2 million, and $6.4 million, respectively. We also present VSL estimates for all 189 countries for which World Bank income data are available, yielding a VSL range from $45,000 to $18.3 million.
Highlights
The value of a statistical life (VSL) is often the critical policy parameter in benefitcost analyses of health and safety risk regulations and other policies.1 Despite the importance of the VSL in identifying efficient regulatory policies, many nations lack accurate VSL measures
Our results demonstrate that the income elasticity ranges for the United States are not consistent with the income elasticities in nonU.S. countries
While estimates of the income elasticity for the whole sample and U.S sample of VSL estimates fall within a range of 0.5–1.0, our point estimate of the international estimate is above the range at about 1.1
Summary
The value of a statistical life (VSL) is often the critical policy parameter in benefitcost analyses of health and safety risk regulations and other policies. Despite the importance of the VSL in identifying efficient regulatory policies, many nations lack accurate VSL measures. Hammitt and Robinson (2011) expand on this technique, including its potential applicability in international studies This approach provides policymakers with a VSL based on the best available empirical evidence while preserving the flexibility to choose their preferred methodology for calculating the critical input parameters: the base VSL, the income elasticity of the VSL, and the measure of income for the United States and the country of interest. The flexibility to choose among various base U.S VSLs, measures of income, and income elasticities may be important; regulators and researchers often fail to agree on the optimal way to infer the policy-relevant VSL value from the economic literature.4 We use this benefit transfer method to calculate VSL estimates for 189 different countries. The VSLs range from a low of $45,000 for Burundi to a high value of $18.3 million for Bermuda
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