Abstract
Policy makers confronted with the need to introduce health and safety regulations often wonder how to value the benefits of these regulations. One way that a monetary value could be placed on reductions in health risks, including risk of death, is through understanding how people are compensated for the different risks they take. While there is an extensive literature on VSL and compensating wage differentials for the developed countries, few such studies exist when it comes to developing countries. Our study is an attempt at obtaining estimates of VSL that reflects Indian risk preferences. Based on a survey of 550 workers in Chennai and 535 workers in Mumbai, we find the value of a statistical life in India to be approximately Rs. 15 million. The value of statistical injury ranges from Rs. 6,000 to Rs. 9,000. Policy makers interested in programs to decrease environmental and health risks could use these numbers as one bench-mark against which costs can be assessed.
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Notes
The extensive set of education and training variables precludes the inclusion of an age variable (Viscusi & Moore, 1989b). The term EXP2 is included to allow for the standard non-linearity in earnings profile over the working life of the individual, i.e., it is included because the increments to earnings from additional years of work experience appear to reach a plateau and become a linear declining function of time–(Kumar & Coates, 1982).
Conceptually, the wage/risk trade-off is interpreted as the... amount of wages that a worker requires to face a small additional amount of risk. The risk coefficient measures the required compensation for a risk increase, so that it is a willingness-to-accept measure. For small changes in risk, this willingness to accept an increased risk equals the willingness to pay for risk reductions (Moore & Viscusi, 1990).
Results are available upon request.
The variation is likely to be a result of errors in either specification or variables chosen.
They estimate a hedonic wage equation using the most recent Occupational Wage Survey, supplemented by data on occupational injuries from the Indian Labour Yearbook.
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Acknowledgements
I gratefully acknowledge the financial support provided by the South Asian Network for Development and Environmental Economics (SANDEE). I am also thankful to Professors Kenneth Arrow, Karl Goran Maler, Partha Dasgupta, M.N. Murty, Herath Gunatilleke, Enamul Haque, Gopal Kadekodi, Priya Shyamsundar, G.K. Karanth, M.R. Narayana, reviewers at SANDEE and an anonymous referees of this journal for their valuable comments and suggestions. I am grateful to Dr. Shanmugam and Dr. Sangita Kamdar for support in the collection of data at Chennai and Mumbai. The usual disclaimers apply.
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Madheswaran, S. Measuring the value of statistical life: estimating compensating wage differentials among workers in India. Soc Indic Res 84, 83–96 (2007). https://doi.org/10.1007/s11205-006-9076-0
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DOI: https://doi.org/10.1007/s11205-006-9076-0