Measuring the Value of Statistical Life in the USA by Means of Risk Assessment of Family Automobile Purchases

Abstract

This paper obtains the value of a statistical life (VSL) for children or the elderly by presenting an empirical analysis of how families value risk and examining family automobile purchases. Automobile safety is shown to be a family public good, where the marginal cost of purchasing and operating a safer automobile is set equal to the usage-weighted sum of the values of statistical life of family members. We use data on automobile purchases to estimate how much single car families of different composition (in terms of children, adults and the retired) spend on safety to impute the VSL of each age group. We find that children are valued more highly than some existing studies suggest. The VSL of the elderly is consistent with the discounted present value of life years approach. These results come, in great part, from an analysis of the fatal accident data that shows that fragility-the susceptibility to death in an accident of fixed severity-increases with age. Also, we show that an important factor for survival in two-vehicle accidents is the relative weight of the vehicles involved. The models of survival in fatal accidents are used to estimate standardized risks of mortality in different types of vehicles. These standardized risks are then used in hedonic models of the purchase price and fuel efficiency of a specified vehicle to determine the capital costs and the operating cost of reducing the risk of mortality. © 2003, JAPAN SECTION OF THE REGIONAL SCIENCE ASSOCIATION INTERNATIONAL. All rights reserved.