Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Value of Statistical Life in India: A Hedonic Wage Approach – isec

Value of Statistical Life in India: A Hedonic Wage Approach

Abstract

Conducting benefit-cost analysis of health and safety regulations requires placing a dollar value on reductions in health risks, including risk of death. These values, estimated from observed labour market data and converted to Values of a Statistical Life (VSL), are used to value reductions in risk of death achieved by industrial safety programmes or environmental health programmes. In this context, this study examines whether workers are paid compensation for their job risk and hence estimates their Value of Statistical Life (VSL) that will reflect job risk preferences of workers in India. The theory of compensating wage differential forms the basis for estimating mortality risks in this study. Using hedonic wage approach, the VSL estimated in this study is INR 44.69 million ($ 0.64 million) and the estimated Value of Statistical Injury (VSI) is INR 1.67 million ($0.02 million). Workers who perceive their job to be hazardous earn a wage premium of Rs 4,358 ($ 68) annually. This paper also examines the implications of using Benefit Transfer Methodology (BTM)and found that it understates the VSL estimate of India. The policy options are highlighted based on the empirical estimates.

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