Working Paper: CEPR ID: DP16425
Authors: Kyle Greenberg; Michael Greenstone; Stephen Ryan; Michael Yankovich
Abstract: This paper estimates the value of a statistical life (VSL), or the willingness to trade-off wealth and mortality risk, among 430,000 U.S. Army soldiers choosing whether to reenlist between 2002 and 2010. Using a discrete choice random utility approach and significant variation in retention bonuses and mortality risk, we recover average VSL estimates that range between $500,000 and $900,000, an order of magnitude smaller than U.S. civilian labor market estimates. Additionally, we fulfill Rosen's (1974) vision to recover indifference curves betweenwealth and non-market goods (e.g., mortality risk) and document substantial heterogeneity in preferences within and across types. We find the VSL increases rapidly with mortality risk within type, and that soldiers in combat occupations have much lower VSLs than thosein noncombat occupations. We estimate that the quadrupling of mortality risk from the Afghanistan and Iraq wars reduced annual welfare by $2,355 per soldier, roughly 8 percent of pay.
Keywords: value of life; forgone income; wage level and structure; wage differentials; public sector labor markets
JEL Codes: J17; J31; J45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher bonuses (M52) | Reenlistment rate (H56) |
| Higher mortality rates (I12) | Reenlistment rate (H56) |
| Higher mortality risk (I12) | VSL (J17) |
| Combat soldiers (H56) | VSL (J17) |