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New risk rates, inter-industry differentials and the magnitude of VSL estimates

Published online by Cambridge University Press:  19 January 2015

Carol R. Scotton
Carol R. Scotton*
Affiliation:
Department of Economics, Knox College, Galesburg, IL 61401, USA
*
Carol R. Scotton, Department of Economics, Knox College, Galesburg, IL 61401, USA, Tel.: (309) 341-7115, cscotton@knox.edu
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Abstract

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The Census of Fatal Occupational Injury (CFOI) provides data for creating objective measures of workplace risk used in estimations of wage-risk premia for value of statistical life (VSL) calculations. This relatively new data set enables a more theoretically defensible measure for use in hedonic wage equations. However, constructing these rates from the CFOI data necessarily involves creating an industry-occupation matrix defining the “jobs,” deciding whether or not to include the self-employed, and selecting a denominator. These choices in the construction of the risk measure alone, as shown here, result in variations of VSL estimates ranging from $8 million to $18 million. Further, risk measures based on the CFOI data, regardless of construction, are sensitive to simple changes in the specification for the hedonic wage equation. In particular, fixed effects describing the industry in which a worker is employed, as well as the worker’s occupation, are primary influences on the magnitude of the VSL estimates.

Keywords

compensating wageshedonic wage modelinter-industry differentialsvalue of a statistical lifeworkplace fatalities
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 4 , Issue 1 , 28 March 2013 , pp. 39 - 80
Copyright
Copyright © Society for Benefit-Cost Analysis 2013

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