Institute for Social and Economic Change
Working Paper: 423
Role of Worker’s Compensation Benefit in Estimating
Value of Statistical Life
A worker’s compensation benefit is an important part of the compensation package for risky jobs, and excluding it during the estimation of Value of Statistical Life (VSL) and Value of Statistical Injury (VSI) may yield biased estimates of wage-risk trade-off. Besides, many studies from developed countries indicate that there exists a negative trade-off between a worker’s compensation benefit and the wage for risky jobs. Therefore, this paper uses information on a sample of 430 workers from the manufacturing industries of Ahmedabad, India to examine the influence of worker’s compensation benefits on their wages and Value of Statistical Life. The results of this study show that including an interaction variable between compensation benefit and injury risk in estimation improves the VSL and VSI estimates. These results have important implications for the labour market in developing countries like India. The estimates of VSL and VSI obtained from this study will help policymakers and government agencies to evaluate the existing policies on compensation benefit and occupational safety in India as well as other developing countries.