Improvement of Estimates of Value of a Statistical life in Russia

The present Master Thesis « Improvement of Estimates of Value of a Statistical Life in Russia» examines the indicator of the value of a statistical life. It is a conventional calculated value which reflects human wellbeing. It is calculated by various methods depending on theoretical prerequisites. Basic theories which form this indicator are the theory of human capital and the theory of value of a statistical life (VSL). The core purpose of this work is to elaborate a model of VSL in Russia and calculate its point estimate for 2014. We have set the following research objectives: 1) Study the scientific basis and research literature dedicated to the VSL estimates. 2) Select contemporary theories which form a methodological basis for the research. 3) Calculate an indicator of VSL in Russia (2014 year) and reveal its correlations with various demographic risks. 4) Reveal synthetic profiles of people with various values of VSL (maximal and minimal). The VSL indicator has been calculated with the Jorgenson-Fraumeni model which is based on the theory of human capital. The main idea of this approach is to assess the value of an X-year old individual as a sum of his average income and adjusted income at the age of X+1 years multiplied by survival probability. We have found out that the VSL for women equalled 26.7 million rubles, that for men, 29.4 million rubles. The VSL theory makes estimates as a trade-off between changes in income and taken changes in death risk. However, numerous demographic events are dual: when one gets a better education degree, one forms personal human capital; from another side, a person chooses whether to continue education, so we can analyze risk exposure. That’s why we have analyzed several demographic events that are connected to personal choices: marriage, obtaining a degree, smoking, alcohol consumption, level of physical activity, etc. We have made quantitative estimates of the aforementioned demographic risks that enrich our VSL model. For a majority of indicators, the level of impact on VSL was predictable (for instance, people who have dangerous jobs get higher salaries and hence they ‘cost’ more). However, certain risks produce an impact that is contradictory to common sense. It turned out to be that, on average, smoking ‘raises’ the price of VSL whilst marriage and regular nutrition ‘cheapen’ it. We offer the hypotheses that explain this phenomenon, and they can form a basis for further research in the value of a statistical life.