Value of statistical life

What is the value of a statistical life?

The value of a statistical life is derived with a methodology called “willingness to pay” to avoid death in relation to the years this person can expect to live according to the statistical life expectancy. The willingness to pay represents how much a representative sample of the population (who in this instance are potential victims) would be willing to pay (in monetary terms) for example for a policy that would reduce their annual risk of dying from 3 in 10.000 to 2 in 10.000.

Enter the standard value of a statistical life used in the country of study (and select your currency). This will form the basis of the financial savings shown in the model. Whenever possible, enter a country-specific value or use a country value from the drop-down menu (not available for Andorra, Monaco and San Marino). If not known, use the European default value of €2.487 million (WHO European Region), €3.387 million (EU-27 countries) or €3.371 million EU-27 countries plus Croatia)2.

Approach to calculate the default values:

The default values were calculated based on a comprehensive report by the OECD (1). The following formula was applied to derive the country-specific values in Euros for the year 2011 (applying adjustments to account for income level differences across countries, inflation and income growth over time and conversion of the currency from USD to local currency using purchasing power parity-adjusted exchange rates (PPP)).

VSL COUNTRY, 2011 (local currency) = VSLEU-27, 2005, USD * (YCOUNTRY, 2005 / YEU-27, 2005) 0.8 * PPP2005
*
(1 + % Δ P2005-2011 ) * (1 +% Δ Y2005-2011 )0.8

VSLEU-27, 2005, USD = base value for EU27 of 3.615 million US$ from OECD-study (±50%)

YCOUNTRY, 2005 = real GDP per capita at purchasing power parity in 2005 of the respective country (2)

YEU-27, 2005 = average real GDP per capita at purchasing power parity in 2005 of EU-27 countries, which equals 26’904 (USD in 2005) (2)

0.8 = income elasticity of VSL according to the OECD-study (1)

PPP2005 = Purchasing power parity-adjusted exchange rate in 2005 (local currency / US$) (2)

(1 + %ΔP 2005-2011 ) = inflation adjustment with consumer price index of the respective country between 2005 and 2011

(1 +% Δ Y2005-2011 ) = income adjustment with growth in real GDP per capita in the respective country between 2005 and 2011

Average values for the EU27, EU28 (including Croatia) and the 53 countries of the WHO European Region were calculated. To do so the population weighted average of the country-specific VSL estimates were used.

Sources
  1. Mortality risk valuation in environment, health, and transport policies. Paris: OECD; 2012.
  2. World Bank Search (database). Paris, World Bank Group, 2014 (http://search.worldbank.org/data, accessed 18 March 2014)