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Effect of Income Heterogeneity on Value of Statistical Life in Taiwan

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No.:WPE2018-5

Author:Liou, Je-Liang

Price:Free

Publication:2018.08

Abstract:

Value of statistical life (VSL) is an important measure to support cost-benefit analysis of public policies to improve social welfare. According to existing literature, the marginal willingness to pay (WTP) for reducing fatal risk is affected by heterogeneity in personal characteristics, and thus, the inferred VSL is also different. The impact of income heterogeneity on VSL is of great significance to policy applications and thus has become a hot topic in studies. In this study, we investigated the effect of income heterogeneity on the VSL in Taiwan through quantile regression analysis using the data collected by the “Manpower Utilization Survey.” The results of this empirical study show that the hedonic wage function (HWM) constructed using empirical data from Taiwan was in line with the general form of non-linear function rather than the semi-log function that has been often used in previous studies, which should have a great impact on the estimation of the VSL. We also found that the estimated VSL of Taiwanese labor varied with the difference in wages, which needs to be taken into account when discussing public policies using VSL.

JEL code: J17, Q51, C31
Keywords: value of statistical life, income heterogeneity, hedonic wage function, Box-Cox transform, quantile regression model
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