Chapter 7. The Value of Individual and Societal Risks to Life and Health

The value of risks to life as measured by the risk-money trade-off plays a fundamental role in economic analyses of health and safety risks and serves as the principal benefit measure for government risk regulation policies. The hedonic models that have been employed to generate empirical estimates of the value of statistical life (VSL) have produced a substantial literature on VSL based on market behavior. Segmentation of labor market opportunities requires that the hedonic approach be altered for disadvantaged labor market groups. Stated preference models often serve a beneficial function, particularly with respect to valuing risks other than acute accident risks and developing estimates of how utility functions depend on health status. The VSL varies with age, income, the cause of death (e.g., cancer), and other factors. This chapter also examines the risk-risk analysis approach and provides a comprehensive survey of the use of VSL by government agencies.