Heterogeneity in the Value of Life

43 Pages Posted: 16 Jun 2014 Last revised: 19 Mar 2023

See all articles by Joseph E. Aldy

Joseph E. Aldy

Harvard Kennedy School; National Bureau of Economic Research; Resources for the Future; Harvard University - Harvard Kennedy School (HKS)

Seamus Smyth

Caxton Associates, L.L.C.

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

We develop a numerical life-cycle model with choice over consumption and leisure, stochastic mortality and labor income processes, and calibrated to U.S. data to characterize willingness to pay (WTP) for mortality risk reduction. Our theoretical framework can explain many empirical findings in this literature, including an inverted-U life-cycle WTP and an order of magnitude difference in prime-aged adults WTP. By endogenizing leisure and employing multiple income measures, we reconcile the literature's large variation in estimated income elasticities. By accounting for gender- and race-specific stochastic mortality and income processes, we explain the literature's black-white and female-male differences.

Suggested Citation

Aldy, Joseph E. and Smyth, Seamus, Heterogeneity in the Value of Life (June 2014). NBER Working Paper No. w20206, Available at SSRN: https://ssrn.com/abstract=2450907

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