Complementarity and the measurement of individual risk tradeoffs: Accounting for quantity and quality of life effects

Mary F. Evans, V. Kerry Smith

Research output: Contribution to journalArticle

10 Scopus citations

Abstract

This paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk. We derive a relationship between the value of a statistical life (VSL) and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship. Our empirical analysis finds that variations in an individual's health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage/risk tradeoffs. We describe how extensions to the specification of hedonic wage models, including measures for quality of life and anticipated longevity threats, help to explain the diversity in past studies examining how the estimated wage-risk tradeoff changes with age.

Original languageEnglish (US)
Pages (from-to)381-400
Number of pages20
JournalEnvironmental and Resource Economics
Volume41
Issue number3
DOIs
StatePublished - Nov 2008

Keywords

  • Benefit cost analysis
  • Hedonic wage method
  • Quality of life
  • Value of a statistical life

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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