Complementarity and the measurement of individual risk tradeoffs: Accounting for quantity and quality of life effects

Mary F. Evans

doi:10.1007/s10640-008-9197-9

Complementarity and the measurement of individual risk tradeoffs: Accounting for quantity and quality of life effects

Mary F. Evans

Economics

Research output: Contribution to journal › Article › peer-review

13 Scopus citations

Abstract

This paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk. We derive a relationship between the value of a statistical life (VSL) and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship. Our empirical analysis finds that variations in an individual's health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage/risk tradeoffs. We describe how extensions to the specification of hedonic wage models, including measures for quality of life and anticipated longevity threats, help to explain the diversity in past studies examining how the estimated wage-risk tradeoff changes with age.

Original language	English (US)
Pages (from-to)	381-400
Number of pages	20
Journal	Environmental and Resource Economics
Volume	41
Issue number	3
DOIs	https://doi.org/10.1007/s10640-008-9197-9
State	Published - Nov 2008

Keywords

Benefit cost analysis
Hedonic wage method
Quality of life
Value of a statistical life

ASJC Scopus subject areas

Economics and Econometrics
Management, Monitoring, Policy and Law

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10.1007/s10640-008-9197-9

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title = "Complementarity and the measurement of individual risk tradeoffs: Accounting for quantity and quality of life effects",

abstract = "This paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk. We derive a relationship between the value of a statistical life (VSL) and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship. Our empirical analysis finds that variations in an individual's health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage/risk tradeoffs. We describe how extensions to the specification of hedonic wage models, including measures for quality of life and anticipated longevity threats, help to explain the diversity in past studies examining how the estimated wage-risk tradeoff changes with age.",

keywords = "Benefit cost analysis, Hedonic wage method, Quality of life, Value of a statistical life",

author = "Evans, {Mary F.}",

note = "Funding Information: Acknowledgements Partial support for this research was provided by the U.S. Environmental Protection Agency through STAR grant 83159501. The research has not been subjected to EPA review and therefore does not necessarily reflect the views of the Agency, and no official endorsement should be inferred. Thanks are due to Ian Bateman, Kip Viscusi, and two anonymous referees for very constructive comments on an earlier draft of this research and to Diana Burns and Richard Laborin for assistance in preparing several drafts of the manuscript. Funding Information: 2 The HRS (Health and Retirement Study) is sponsored by the National Institute of Aging (grant number NIA U01AG09740) and conducted by the University of Michigan. Where possible, we rely on the RAND Corporation{\textquoteright}s cleaned version of the HRS. Otherwise, we use the raw HRS data.",

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N2 - This paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk. We derive a relationship between the value of a statistical life (VSL) and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship. Our empirical analysis finds that variations in an individual's health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage/risk tradeoffs. We describe how extensions to the specification of hedonic wage models, including measures for quality of life and anticipated longevity threats, help to explain the diversity in past studies examining how the estimated wage-risk tradeoff changes with age.

AB - This paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk. We derive a relationship between the value of a statistical life (VSL) and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship. Our empirical analysis finds that variations in an individual's health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage/risk tradeoffs. We describe how extensions to the specification of hedonic wage models, including measures for quality of life and anticipated longevity threats, help to explain the diversity in past studies examining how the estimated wage-risk tradeoff changes with age.

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KW - Hedonic wage method

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KW - Value of a statistical life

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Complementarity and the measurement of individual risk tradeoffs: Accounting for quantity and quality of life effects

Abstract

Keywords

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