Roy Model Sorting and Non-Random Selection in the Valuation of a Statistical Life

Thomas DeLeire () and Christopher Timmins

No 14364, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Wage-hedonics is used to recover the value of a statistical life by exploiting the fact that workers choosing riskier occupations will be compensated with a higher wage. However, Roy (1951) suggests that observed wage distributions will be distorted if individuals select into jobs according to idiosyncratic returns. We illustrate how this type of sorting may bias wage-hedonic VSL estimates and describe two estimators that correct for it. Using data from the CPS, we recover VSL estimates that are three to four times larger than those based on the traditional techniques, statistically significant, and robust to a wide array of specifications.

JEL-codes: J17 J31 Q5 Q51 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-hea and nep-lab
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Published as Thomas DeLeire & Shakeeb Khan & Christopher Timmins, 2013. "Roy Model Sorting And Nonrandom Selection In The Valuation Of A Statistical Life," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 279-306, 02.

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