ESSAYS ON THE VALUE OF HEALTH RISKS

Abstract

My dissertation focuses on the willingness to pay (WTP) for mortality risk reductions inChina and derives estimates of the value per statistical life (VSL) through the lens of labor market participation, medical expenditure, and the choice of automobiles. My dissertation utilizes a variety of data sources and leverages a wide range of identification strategies to estimate the VSL, an important input for benefit-cost analyses of environmental, health, and safety regulations and programs. In my first chapter, I use the compensating wage differential method to estimate the trade-offs between wage and fatality risks in China. Based on recent Chinese labor market data, I find a positive and statistically significant wage premium for fatality risk for Chinese workers who work in relatively dangerous sectors. I estimate the fatality risk elasticity of wages to be about 0.07, and the implied Value of a Statistical life for the average worker is approximately $1.7 million USD, marking a large increase in the VSL in China over the past two decades. In my second chapter, I use a longevity survey dataset from China to estimate the effect of medical expenditure on the mortality rate of the elderly. Estimates based on instrumental variable estimators indicate that, on average, every additional 1,000 CNY of medical expenditure decreases the mortality rate by 3%. Under certain assumptions, these figures can be used to compute the value per statistical life (VSL) for Chinese senior citizens. The mean VSL at age 65 is around $100,000, and the mean VSL decreases to $5,000 by age 90. In my third chapter, I study the WTP for safety based on Chinese car buyers’ choice of automobiles. The primary findings from a reduced-form model indicate that, on average, Chinese car buyers demonstrate a marginal car buyer’s WTP of $200 for the inclusion of ABS in their vehicles. The implied value per statistical life (VSL) stands at approximately $0.75 million. Estimation from a structural model suggests that after netting off the effect of increased sales quantity, the WTP of ABS is $350. Sensitivity analyses indicate that the VSL estimate ranges from $0.5 million to $1.5 million.