NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Complementarity and the Measurement of Individual Risk Tradeoffs: Accounting for Quantity and Quality of Life Effects

Mary F. Evans, V. Kerry Smith

NBER Working Paper No. 13722
Issued in January 2008
NBER Program(s):   EEE   LS

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.

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Document Object Identifier (DOI): 10.3386/w13722

Published: Mary Evans & V. Kerry Smith, 2008. "Complementarity and the Measurement of Individual Risk Tradeoffs: Accounting for Quantity and Quality of Life Effects," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(3), pages 381-400, November.

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