Joseph Aldy Photo

Joseph Aldy

Appointment
Associate Professor of Public Policy
Office Address
79 John F. Kennedy St. Ofer Bldg 403
617-496-7213
Aldy, Joseph, and Seamus Smyth. "Heterogeneity in the Value of Life." HKS Faculty Research Working Paper Series RWP14-024, May 2014.

Abstract

We develop a numerical life-cycle model with choice over consumption and leisure, stochastic mortality and labor income processes, and calibrated to U.S. data to characterize willingness to pay (WTP) for mortality risk reduction. Our theoretical framework can explain many empirical findings in this literature, including an inverted-U life-cycle WTP and an order of magnitude difference in prime-aged adults WTP. By endogenizing leisure and employing multiple income measures, we reconcile the literature's large variation in estimated income elasticities. By accounting for gender- and race-specific stochastic mortality and income processes, we explain the literature's black-white and female-male differences.