Risk Heterogeneity and the Value of a Statistical Life: Further Market-Based Evidence

Journal of Benefit-Cost Analysis
2011 Vol. 2: Issue 3, Article 1


This research examines preferences for reducing mortality and morbidity risks as related to the characteristics of the risks faced.  We exploit the inherent heterogeneity in workplace risks to conduct one of the few revealed preference studies on this topic. Unique location-specific risk data are developed for over 300 US cities that measure both accidental and homicide risks faced by our sample of workers. A sample of occupational drivers is used to separately identify the wage premiums for facing increased homicide and accidental risks.  Both these risks significantly vary intracity (across driving occupations) and intercity. Results indicate that the characteristics of risk affect the compensation demanded to face those risks in intuitive and economically important ways. As such, caution is urged for benefits transfer exercises that apply estimates of the marginal willingness to pay for reducing labor market accident risks to policies affecting risks with very different characteristics, such as common environmental risks.