Conference Agenda

The value of mortality risk reductions, conventionally expressed as the value per statistical life (VSL), often drives the benefits of environmental and other policies and regulations. While both theory and empirical evidence suggest that VSL varies depending on the characteristics of the individuals and the risks affected, it is often treated as a constant. Equity is the main justification for using a common VSL as it seemingly avoids making any judgement about how VSL should vary by individual characteristics. In particular, a uniform VSL is tantamount to attaching relatively larger weight to survival benefits for the disadvantaged and lower weight to survival benefits for the advantaged. Thus, a uniform VSL mimics the use of equity weights, while avoiding the challenges of explicitly computing the weights. The paper investigates the bias in policy ranking by using a uniform VSL instead of heterogeneous VSLs and equity weights. Focusing on the relationship between VSL and income, we find that the uniform VSL tends to over-estimate the utilitarian value of a policy because it neglects the distribution of costs and the welfare burden of policies on low-income individuals. A numerical application based on U.S. data suggests that the bias is sizable, especially when the policy costs are regressive and the survival benefits are progressive.