Valuing Life as an Asset, as a Statistic, and at Gunpoint

  • Julien Hugonnier Julien Hugonnier
  • Florian Pelgrin Florian Pelgrin
  • Pascal St-Amour Pascal St-Amour

The Human Capital (HK), and Statistical Life Values (VSL) differ sharply in their empirical pricing of a human life and lack a common theoretical background, to justify these differences. We fi rst contribute to the theory, and measurement of life value by providing a uni ed framework to formally de fine, and relate the Hicksian willingness to pay (WTP) to avoid changes in death risks, the HK, and the VSL. Second, we use
this setting to introduce a benchmark life value calculated at Gunpoint (GPV), i.e. the maximal WTP to avoid certain, instantaneous death. Third, we associate a flexible human capital model to the common framework to characterize the WTP and the three life valuations in closed-form. Fourth, our structural estimates of these solutions yield mean life values of 8.35 M$ (VSL), 421 K$ (HK) and 447 K$ (GPV). We con firm that the strong curvature of the WTP, rather than segmented frameworks, explains why the VSL is much higher than other values.

Keywords: Value of Human Life, Human Capital, Value of Statistical Life, Willingness to pay, Equivalent Variation, Mortality, Structural Estimation.
JEL Classi fication: J17, D91, G11.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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