CPR Working Paper Series No. 117
The Value of
Statistical Life: Pursuing the Deadliest Catch
Kurt E. Schnier, William C. Horrace, and Robert G. Felthoven
October 2009
Abstract:
Observed tradeoffs
between monetary returns and fatality risk identify estimates of the value of a
statistical life (VSL), which inform public policy and quantify preferences for
environmental quality, health and safety. To date, few investigations have
estimated the VSL associated with tradeoffs between returns from natural
resource extraction activities and the fatality risks they involve. Furthermore
researchers have been unable to determine whether or not one’s VSL is stable
across multiple decision environments using revealed preference methods.
Understanding these tradeoffs (and the VSL that they imply) may be used to
inform resource management policy and safety regulations, as well as our general
understanding of the value of life. By modeling a commercial fishing captain's
choice to fish or not, conditional on the observed risk, this research
investigates these topics using data from the Alaskan red king crab and snow
crab fisheries. Using weather conditions and policy variables as instruments,
our estimates of the mean VSL range from $4.00M to $4.76M (depending on the
modeling assumption and fishery analyzed) and are robust to the incorporation of
heterogeneous preferences. Furthermore, given the unique nature of the data we
are able to conduct an intra-vessel comparison of the VSL and conclude that for
roughly 92% of the fishermen observed in the data set their VSL estimates are
stable across both fisheries.
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