Fixed‐effects Hedonic Price Model for Statistical Value of Live Estimations

Abstract

Relatively little attention has been given to the differences in value of statistical life (VSL) from developed and less developed countries. The paper derives a cross‐countries VSL estimate based on road fatality accidents and it provides a test to check for such differences. Estimations were obtained from a fixed‐effect hedonic price model applied to a panel of data using new and second‐hand car prices from 27 countries as a dependent variable. The VSL estimate of e6.63 million is in line with results from other studies; and the income elasticity of VSL between countries is close to unity, implying that VSL is approximately proportional to income.

Acknowledgements

The authors acknowledge partial support from CICYT Project No. SEJ2004‐00143/ECON from the Spanish government.

Notes

1. GNI per capita per country was divided into three dummy variables: high‐income > 26 750, 26 750 > upper‐middle income > 4570, 4570 > middle‐ and lower‐income group.

2. Since the actual car buyer’s perception of airbag risk reduction is ignored, the actual risk reduction observed is used as a proxy for the VSL calculation, which is in line with current practice in hedonic studies (see, for instance, those reported in Viscusi and Aldy, 2003).