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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Life-Cycle Consumption and the Age-Adjusted Value of Life

Thomas J Kniesner1 / W. Kip Viscusi2 / James P Ziliak3

1Syracuse University,

2Harvard University,

3University of Kentucky,

Citation Information: Contributions in Economic Analysis & Policy. Volume 5, Issue 1, ISSN (Online) 1538-0645, DOI: 10.2202/1538-0645.1524, January 2006

Publication History

Published Online:
2006-01-31

Abstract

Our research presents new evidence on the age pattern of the implicit value of life revealed from workers' differential wages and job safety pairings. Although aging reduces the number of years of life expectancy, aging can affect the value of life through an effect on planned life-cycle consumption. The elderly could, a priori, have the highest implicit value of life if there is a life-cycle plan to defer consumption until old age. We find that largely due to the age pattern of consumption, which is non-constant, the implicit value of life rises and falls over the lifetime in a way that the value for the elderly is higher than the average over all ages or for the young. There are important health policy implications of our empirical results. Because there may be age-specific benefits of programs to save statistical lives, instead of valuing the lives of the elderly at less than the young, health policymakers should more correctly value the lives of the elderly at as much as twice the young because of relatively greater consumption lost when accidental death occurs.

Keywords: value of statistical life; life cycle consumption; job safety

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