Working Paper: NBER ID: w10199
Authors: Joseph E. Aldy; W. Kip Viscusi
Abstract: This paper develops a life-cycle model in which workers choose both consumption levels and job fatality risks, implying that the effect of age on the value of life is ambiguous. The empirical analysis of this relationship uses novel, age-dependent fatal and nonfatal risk variables. Workers' value of statistical life exhibits an inverted U-shaped relationship over workers' life cycle based on hedonic wage model estimates, age-specific hedonic wage estimates, and a minimum distance estimator. The value of statistical life for a 60-year old ranges from $2.5 million to $3.0 million -- less than half the value for 30 to 40-year olds.
Keywords: Value of Statistical Life; Age Variations; Hedonic Wage Model; Lifecycle Model
JEL Codes: J17; I12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Age (J14) | Value of Statistical Life (VSL) (J17) |
| Age (J14) | VSL peaks in the 30s (J17) |
| VSL peaks in the 30s (J17) | VSL declines (J17) |
| Age (J14) | VSL varies with age (J17) |
| Age (J14) | Consumption patterns and job risk decisions influence VSL (J17) |
| Age (J14) | Inverted U-shaped relationship with VSL (J17) |
| Age (J14) | Statistically significant negative coefficient in labor market studies (J79) |