Revisiting the value of a statistical life: an international approach during COVID-19

Abstract

Although the employment of the value of a statistical life (VSL) is a cornerstone of USA governmental risk analysis, many argue that the VSL is flawed when evaluating proposed regulations. The VSL is only an estimate of the willingness to accept wage versus risk, which may be inaccurate for policies that mitigate large risks in pandemics, such as COVID-19. The VSL is revisited using a different approach and utilized in measuring the total value of loss from deaths caused by COVID-19 for 48 selected countries. The modified theory of the demand for health by Gary Becker is utilized to measure the VSL resulting from consumer optimization of utility, subject to constraints and investments in health made to change their survivorship at different ages. Estimates show that the VSL for an average American is around $7.2 million compared to the world VSL of about $1.3 million. Switzerland has the highest VSL of approximately $9.4 million. The total value of loss from deaths caused by COVID-19 is around 6.1% of the USA GDP, compared to the global loss of 1.2% of the world's GDP, while Belgium has the highest value of loss with 9.7% of its GDP. The best possible data and procedures are necessary to make robust and reliable public health decisions while responding to the COVID-19 pandemic. The VSL measure introduced here can be applied to a specific individual, group, or population. It is comprehensive, straightforward, generalizable, and provides a consistent measure with the most popular methods. More importantly, it provides an added value to the existing methods that enable us to break down the VSL into two main components, one that accounts for working time. The other accounts for leisure time and different diminishing consumption and discount rates.