ERIC Number: EJ696090
Record Type: Journal
Publication Date: 2004-Feb
Reference Count: N/A
Using Mandated Speed Limits to Measure the Value of a Statistical Life
Ashenfelter, Orley; Greenstone, Michael
Journal of Political Economy, v112 n1 p226 Feb 2004
In 1987 the federal government permitted states to raise the speed limit on their rural interstate roads, but not on their urban interstate roads, from 55 mph to 65 mph. Since the states that adopted the higher speed limit must have valued the travel hours they saved more than the fatalities incurred, this institutional change provides an opportunity to estimate an upper bound on the public's willingness to trade off wealth for a change in the probability of death. Our estimates indicate that the adoption of the 65-mph limit increased speeds by approximately 4 percent, or 2.5 mph, and fatality rates by roughly 35 percent. Together, the estimates suggest that about 125,000 hours were saved per lost life. When the time saved is valued at the average hourly wage, the estimates imply that adopting states were willing to accept risks that resulted in a savings of $1.54 million (1997 dollars) per fatality, with a sampling error roughly one-third this value. We set out a simple model of states' decisions to adopt the 65-mph limit that turns on whether their savings exceed their value of a statistical life. The empirical implementation of this model supports the claim that $1.54 million is an upper bound, but it provides imprecise estimates of the value of a statistical life.
University of Chicago Press, Journals Division, P.O. Box 37005, Chicago, IL 60637. Tel: 773-753-3347; Web site: http://www.journal.uchicago.edu; e-mail: email@example.com.
Publication Type: Journal Articles; Reports - Research
Education Level: N/A
Authoring Institution: N/A