Assessing the incorporation of latent variables in the estimation of the value of a statistical life

For many years, the economic literature has recognized the role of attitudes, beliefs, and perceptions in estimating the value of a statistical life (VSL). However, few applications have attempted to include them. This article incorporates the perceived controllability and concern about traffic and cardiorespiratory risks to estimate VSL using a hybrid choice model (HCM). The HCM allows us to include unobserved heterogeneity and improve behavioral realism explicitly. Using data from a choice experiment conducted in Santiago, Chile, we estimate a VSL of US$3.78 million for traffic risks and US$2.06 million for cardiorespiratory risks. We found that higher controllability decreases the likelihood that the respondents would be willing to pay for risk reductions in both risks. On the other hand, concern about these risks decreases the willingness to pay for traffic risk reductions but increases it for cardiorespiratory risk reductions.