Treatment of the Economic Value of a Statistical Life in Departmental Analyses – 2011 Interim Adjustment

Overview

Departmental guidance on valuing reduction of fatalities and injuries by regulations or investments was first published in the 1993 memorandum "Treatment of Value of Life and Injuries in Preparing Economic Evaluations." This guidance was revised in 2008 on the basis of later research, yielding a value of statistical life (VSL) of $5.8 million. The last time our guidance was adjusted was in 2009, when we announced the current value of $6.0 million. Using the 2009 value as the baseline, we now find that changes in prices and incomes over the last two years imply an increased VSL of $6.2 million for analyses prepared in 2011.

However, since our last formal examination of the professional literature about VSL occurred three years ago, we have decided to conduct a further review, so that we can ensure the value used by Department analysts reflects the best and most recent academic research. While analysts should, for now, base analyses on a VSL of $6.2 million, we may further revise that guidance after completion of the review.

Note also that we are adopting three changes in methodology in addition to the current interim VSL adjustment. First, although we have previously updated VSL estimates to current values by using an income elasticity of 0.55, we will now forecast higher future VSL in response to expected income growth. Second, consistently with the increasing VSL so derived, we replace standard deviations specified in dollars with ones defined in proportion to the value of benefits. Third, we update the relative values of injuries of varying severity on the basis of a recent study.