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AN EMPIRICAL BAYES APPROACH TO COMBINING ESTIMATES OF THE VALUE OF A STATISTICAL LIFE FOR ENVIRONMENTAL POLICY ANALYSIS
Citation:
HUBBELL, B., I. Kochi, AND R. Kramer. AN EMPIRICAL BAYES APPROACH TO COMBINING ESTIMATES OF THE VALUE OF A STATISTICAL LIFE FOR ENVIRONMENTAL POLICY ANALYSIS. Environmental and Resource Economics. Springer, New York, NY, 34:385-406, (2006).
Impact/Purpose:
Updates literature used to derive the EPA estimate of the value of a statistical life (VSL) for use in cost-benefit analyses. Applies new statistical approach to combining results from individual studies into a mean estimate and provides an estimate of the distribution of VSL.
Description:
This analysis updates EPA's standard VSL estimate by using a more comprehensive collection of VSL studies that include studies published between 1992 and 2000, as well as applying a more appropriate statistical method. We provide a pooled effect VSL estimate by applying the empirical Bayes random-effects estimation method. This approach allows the overall mean and distribution of VSL to reflect the underlying variability of the individual VSL estimates, as well as the observed variability between VSL estimates from different studies. In addition, the random effect method departs from the assumption that all studies receive equal weight and assigns weight according to each study's precision. In addition, the study examines the sensitivity of VSL estimates to the choice of VSL estimation method, location, and study inclusion criteria.