HERO Online Working Paper Series,
University of Oslo, Health Economics Research Programme

Abstract: The focus of this paper is to discuss and compare different approaches to calculate the statistical value of life (VSL) based on survey data. In this paper, we find out that people significantly prefer to reduce the premature death related to the environmental pollution than to reduce the premature death caused by heart disease by using discrete choice technique and estimate a simple logit and ordered logit model. But no significant evidence indicates saving lives from environmental pollution is more preferred than saving lives from traffic accident, or vice versa. VSL is directly calculated from preferences based on our estimates. We try to link the WTP with the random utility framework in this paper. A new way to make use of the information of WTP is introduced. We show that in theory the common estimates on study of the relationship between WTP and other socio-economic variables by using OLS is biased due to the selection problem. By introducing an “instrument variable” into the regression, it’s possible to correct the selection bias.

Keywords: Statistical value of life; VSL; traffic accident; willingness to pay

JEL-codes: I18

52 pages, June 14, 2009

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