Valuing Mortality Risk Reduction Benefits of Federal Regulations: Comments on Circular A-4
This article outlines the US Office of Management and Budget guidance and proposes using labor-market and stated preference studies to estimate empirical values for valuing mortality risks.
Abstract
Mortality risk reductions have a prominent role in the assessment of government regulations. To provide guidance to agencies in monetizing these effects, US Office of Management and Budget (OMB) Circular A-4 has indicated that a risk trade-off approach is appropriate for assessing the value of a statistical life (VSL) and the value of a statistical life-year (VSLY). This article explains the OMB guidance and indicates how agencies might develop these empirical values. Particularly when valuing risks of traumatic injuries, we favor reliance on revealed preference evidence based on labor-market studies that draw on the most reliable evidence on occupational fatality risks. We further propose basing estimates of the VSLY and the income elasticity of the VSL on hedonic wage studies. Stated preference evidence may also be instructive in valuing mortality risks such as cancer and other illnesses that involve a long-term morbidity component.
