How Unobservable Productivity Biases the Value of a Statistical Life

Thomas J. Kniesner (), W Kip Viscusi, Christopher Woock () and James P. Ziliak

No 11659, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A prominent theoretical controversy in the compensating differentials literature concerns unobservable individual productivity. Competing models yield opposite predictions depending on whether the unobservable productivity is safety-related skill or productivity generally. Using five panel waves and several new measures of worker fatality risks, first-difference estimates imply that omitting individual heterogeneity leads to overestimates of the value of statistical life, consistent with the latent safety-related skill interpretation. Risk measures with less measurement error raise the value of statistical life, the net effect being that estimates from the static model range from $5.3 million to $6.7 million, with dynamic model estimates somewhat higher.

JEL-codes: I10 J17 J28 K00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-hea and nep-law
Date: 2005-10
Note: HE LE PE
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