TY  - JOUR
AU  - Evans,Mary F.
AU  - Smith,V. Kerry
TI  - Measuring How Risk Tradeoffs Adjust With Income
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15372
PY  - 2009
Y2  - September 2009
UR  - http://www.nber.org/papers/w15372
L1  - http://www.nber.org/papers/w15372.pdf
N1  - Author contact info:
Mary F. Evans
The Robert Day School
  of Economics and Finance
Claremont McKenna College
500 E. Ninth Street
Claremont, CA 91711
E-Mail: Mary.Evans@ClaremontMcKenna.edu

V. Kerry Smith
Department of Economics
W.P. Carey School of Business
P.O. Box  879801
Arizona State University
Tempe, AZ 85287-9801
Tel: 480/727-9812
Fax: 480/965-0748
E-Mail: kerry.smith@asu.edu
AB  - Efforts to reconcile inconsistencies between theory and estimates of the income elasticity of the value of a statistical life (IEVSL) overlook important restrictions implied by a more complete description of the individual choice problem. We develop a more general model of the IEVSL that reconciles some of the observed discrepancies. Our framework describes how exogenous income shocks, such as unexpected medical expenditures, may affect labor supply decisions which in turn influence both the coefficient of relative risk aversion and the IEVSL. The presence of a consumption commitment, such as a home mortgage, also alters this labor supply adjustment. We use data from the Health and Retirement Study to explore the responsiveness of labor force exit decisions to spousal health shocks and the role of a home mortgage as a constraint on this response.
ER  -