Article

Aggregation Biases in Estimates of the Value of a Statistical Life: Evidence from Logitudianl Matched Worker-Firm Data in Tawain

James K. Hammitt, Jin-Tan Liu, and W-J Tsai

Abstract

This study uses a unique longitudinally-linked employer–employee dataset to estimate the magnitude of bias in estimating the value per statistical life (VSL) that arises from the conventional use of industry-average occupational risk. This unique dataset, covering workers in Taiwan over the period 1998–2002, allows us to distinguish among potential sources of bias including omitted variables and to control for the potential endogeneity of firm-specific job risk with respect to unobserved worker and firm characteristics. We find that VSL estimates based on risk data aggregated by three-digit manufacturing SIC codes are biased downward by an order of magnitude compared with estimates using firm-specific risk that control for endogeneity.

Keywords

Value per statistical life; Firm-level risk data; Linked employer-employee data;

Published in

Environmental and Resource Economics, Springer Netherlands, vol. 49, n. 3, 2011, pp. 425–449