Daniel Herrera-Araujo and Lise Rochaix*

This article was originally published in the September 2020 edition of the 5 papers…in 5 minutes.

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All humans face a wide array of risks to health and life, but they differ in their valuations of wealth, health and life. It seems natural to expect that individuals’ valuations for reducing risks to health or life will depend on personal characteristics. That is, for a similar health- or life-risk reduction, the gains may not be valued in the same way by young/healthy individuals compared to older/sick ones. Thus, the willingness to pay (WTP) for a (very) small mortality risk reduction, namely the Value per Statistical Life (VSL), may depend on the context in which it is valued by respondents. Insights from theory suggest that VSL may vary positively or negatively with age and baseline health. The relationship between VSL, age and baseline health therefore remains an empirical question.

In this article, Daniel Herrera-Araujo and Lise Rochaix investigate this relationship by combining a data set of French industry-related mortality risks, along with Constances, a population-based panel containing individuals’ medical and work history and they focus on blue-collar males, aged between 20 to 59 years of age. Exploiting individuals’ job changes along their professional careers, the authors identify individual’s WTP for a small mortality risk reduction. Next, to identify the effects of age and baseline health on VSL, they exploit variations on individuals’ age and health at the time individuals’ decide to change jobs with different risk characteristics. The results suggest that the average VSL estimate is close to 6.5 million euros (in 2015 euros), which is comparable to US-based estimates. In addition, the results show that VSL decreases with better baseline health and decreases with age.

VSL is a key statistic used to measure the benefits of mortality risk reductions generated by public policies. Today’s official VSL value used by the French administration (3.2 million euros in 2015 euros) is lower than what the authors’ findings suggest and does not change with baseline health or age.PNG - 23 kb

Adopting a context-dependent VSL estimate for benefits’ valuation, however, has proven highly controversial, as experienced by the US Environmental Protection Agency’s (EPA) decision to use an age-adjusted VSL in their ‘Clear Skies’ initiative back in 2003. It was strongly criticized by members of the general public, and the agency quickly withdrew its proposal. These findings suggest opening up the discussion, not only on the magnitude of French VSL estimates, but more generally on the legitimacy of policies aimed at differentiating VSL estimates according to age or health condition. More research is needed in order to cover other subgroups to arrive at a fully representative VSL value for the French population.



Original title of the article: Does the Value per Statistical Life vary with age or baseline health? Evidence from a compensating wage study in France

Published in: Journal of Environmental Economics and Management

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* PSE Member

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