Compensation for Occupational Risk and Valuation of Statistical Life

This paper uses information on a sample of 430 blue collar workers from different manufacturing industries of Ahmedabad, India to examine the influence of worker’s compensation on their wage and mortality rates. This relation has a direct impact on the value of statistical life (VSL) estimates which is used to evaluate various health and safety policies. The compensation benefit plays a significant role in worker’s compensation package however it has not received much attention in previous Indian studies. Inclusion of the compensation variable not only raises the co-efficient of risk variables but also increases the value of statistical life and value of statistical injury (VSI) estimates. The result of this study indicates that trade-off between worker’s wage and compensation benefit exists for the workers in the sample. The estimated VSL that captures the effect of compensation benefit ranges between INR 30.27 million ($0.46 million) and INR 72.11 million ($1.10 million) while the estimated VSI ranges between INR 1.94 million ($0.029 million) and INR 2.82 million ($0.043 million). Besides, this paper goes further to study the rate of substitution between worker’s compensation benefit and their wage and finds that the benefit levels are sub-optimal.

     

Measuring the value of statistical life: estimating compensating wage differentials among workers in India

Policy makers confronted with the need to introduce health and safety regulations often wonder how to value the benefits of these regulations. One way that a monetary value could be placed on reductions in health risks, including risk of death, is through understanding how people are compensated for the different risks they take. While there is an extensive literature on VSL and compensating wage differentials for the developed countries, few such studies exist when it comes to developing countries. Our study is an attempt at obtaining estimates of VSL that reflects Indian risk preferences. Based on a survey of 550 workers in Chennai and 535 workers in Mumbai, we find the value of a statistical life in India to be approximately Rs. 15 million. The value of statistical injury ranges from Rs. 6,000 to Rs. 9,000. Policy makers interested in programs to decrease environmental and health risks could use these numbers as one bench-mark against which costs can be assessed.