The value of a statistical life year

Abstract Embedded in the value of a statistical life (VSL) is a stream of valuations of each expected year of life. The value of a statistical life year (VSLY) has a policy-relevant role analogous to the VSL, except that it monetizes risks to short periods of life extension. This article reviews previous studies and reports new labor market estimates of the average VSLY and the variation of these values with age using two methods—inferring the average VSLY based on estimates of the VSL and a new method that provides direct empirical estimates of the valuation of a discounted life year. The direct estimates of the VSLY yield larger values than the constructed estimates. The VSLY based on fatality rates by industry and occupation is $600,000 to $800,000 at a 3% interest rate. Estimates based on age-adjusted fatality rates are somewhat lower. The discount rate used in assessing the VSLY has a pivotal effect on the estimated VSLY. The VSLY is substantially lower in the absence of discounting and more than doubled at a discount rate of 10%. Failure to use a positive discount rate greatly understates the VSLY. The article also reviews previous VSLY studies as well as estimates of the discount rate for years of life expectancy.