Question

Application 2 (see application 10.1 in your textbook) Consider a study found that failure to purchase or correctly use car seats on the part of the mother’s raised the risk of death to their children by 0.0003, or three out of ten thousand from birth to age four. It collected data on 190 people (all women) leaving a shopping mall with their kids; only 33% either had a car seat or were using it correctly. The study calculated that properly hooking the kids in would take about 69 hours over four years. It hypothesized that the opportunity cost of women’s time would be an important determinant of whether or not car seats were installed or properly used. Using a statistical model it concluded that controlling for some other factors, moms with a higher opportunity cost to their time (a higher foregone wage), were statistically less likely to install or properly use a car seat. The study calculated that a wage increase of $2.40 per hour would (all other things equal) induce a mom to forgo installing or properly using a car seat.

Is the estimated value of a child’s life here more or less than the figure used by EPA ($6 million)?

If the risk of death increases to 0.0005 (or five out of ten thousand from birth to age four) does it increase or decrease the estimated value of a child’s life?

Answer 1

Is the estimated value of a child’s life here more or less than the figure used by EPA ($6 million)?

The estimated value of a child’s life is less than the figure used by the EPA (6 million).

It is estimated to be $2.40 per hour saved * 69 hours saved per mom/0.0003 lives lost per mom = $552,000 per life lost

If the risk of death increases to 0.0005 (or five out of ten thousand from birth to age four) does it increase or decrease the estimated value of a child’s life?

If the risk of death increases to 0.0005 it decreases the estimated value of a child’s life.

$2.40 per hour saved * 69 hours saved per mom/0.0005 lives lost per mom = $331,200 per life lost