Research Papers

“Using Income Tax Changes to Identify the Value of a Statistical Life” (Job Market Paper) VSL
A vast literature has focused on estimating an extremely critical parameter, the value of a statistical life (VSL), by looking at the tradeoff between wages and occupational risk. The literature has recognized the inherent identification issues with any empirical strategy identifying off cross-sectional risk variation or risk changes over time. These concerns likely bias the estimates downward. By recognizing that the magnitude of any compensating differential is a function of the tax rate, this paper employs an innovative identification strategy to estimate the VSL parameter. When tax rates change, the pre-tax wages of dangerous jobs should shift relative to the pre-tax wages of safe jobs. This relative shift is directly proportional to the VSL. While prior studies have relied on potentially endogenous variation in risk for identification, I use tax schedule changes as a more plausibly exogenous source of variation since they are beyond the control of workers or firms. This strategy allows me to account for industry- or individual-level heterogeneity without using industry-specific changes in risk levels as a source of identification. This strategy yields VSL estimates between $50 million and $75 million, an order of magnitude higher than the previous literature.