When GDP Misleads: Inferring Living Standards from the Value of a Statistical Life

Philip Trammell and Charles Jones

No 35382, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Real GDP per person is a widely used proxy for living standards, but it can be a poor welfare measure when new goods or quality improvements matter, when nonmarket goods are significant, and when preferences are nonhomothetic --- all of which are true in practice. We propose an alternative that is robust to these concerns: under weak conditions, the growth rate of the value of a statistical life (VSL), together with standard Euler-equation objects, identifies the growth rate of lifetime utility. The intuition is that people routinely trade off consumption against mortality risk, and their willingness to pay for small risk reductions reveals the value of remaining lifetime utility. Implementing this approach for the United States suggests that lifetime utility may have risen by more than a factor of five since 1940, whereas conventional consumption-based calculations using a stable log/CRRA flow utility imply much smaller gains, on the order of a doubling. This calculation is sensitive to measures of the growth rate of the VSL, the rate of time preference, and the interest rate. For example, if the correct interest rate is 4 percentage points higher than the T-bill rate, then lifetime utility would be measured to have declined by more than half since 1940.

JEL-codes: E01 O4 (search for similar items in EconPapers)
Date: 2026-06
Note: EFG
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w35382.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:35382

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w35382
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().