Applied Micro Seminar - Stephen Ryan (Washington University St. Louis)

Abstract: This paper estimates the value of a statistical life (VSL), or the willingness to trade-off wealth and mortality risk, among 430,000 U.S. Army soldiers choosing whether to reenlist between 2002 and 2010. Using a discrete choice random utility approach and significant variation in retention bonuses and mortality risk, we recover average VSL estimates that range between $500,000 and $900,000, an order of magnitude smaller than U.S. civilian labor market estimates. Additionally, we fulfill Rosen’s (1974) vision to recover indifference curves between wealth and non-market goods (e.g., mortality risk) and document substantial heterogeneity in preferences across types. We find that the VSL increases rapidly with mortality risk within type, and that soldiers in combat occupations have much lower VSLs than those in noncombat occupations. We estimate that the quadrupling of mortality risk from the Afghanistan and Iraq wars reduced annual welfare by $2,355 per soldier, roughly 8 percent of pay

Location: A1/3 Physics Building

Paper