Estimating the Value of a Statistical Life Using Labor Market Data

Naomi Miyazato

Japanese Economy, 2011, vol. 38, issue 4, 65-108

Abstract: In benefit analyses conducted on the reduction of risks related to life, there is a concept known as the value of a statistical life. To perform a cost-benefit analysis, information is needed on the costs involved in reducing risks and the benefits that can be derived by reducing those risks. The value of a statistical life is used for analyzing the benefits of risk reduction with regard to mortality. Value of a statistical life estimates valuable information when performing a cost-benefit analysis of policies regarding the environment, health care, and safety. In Japan, value of a statistical life estimates are largely studied using the stated preference method while few are conducted using the revealed preference method. In this study, the analysis is conducted using the latter, the revealed preference method. Specifically, I estimate the wage premium for job-related risk and the value of a statistical life using labor market data from the Employment Status Survey and the Industrial Accident Trends Survey. A simple compilation of the estimation results shows that the job-related mortality risk using data from companies with 100 or more employees has a statistically significant and positive effect on wages, confirming the presence of a positive wage premium. On the other hand, when using data from companies with a workforce size of 30-99 employees, no clear correlation is found between job-related mortality risk and wages. The value of a statistical life calculated using the estimation results from companies with a workforce size of 100 or more employees ranges from ¥820 million to ¥2.14 billion. These results are higher than those produced by overseas studies that have calculated the value of a statistical life based on labor market data.

Date: 2011
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DOI: 10.2753/JES1097-203X380403

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