Implicit Value of a Person's Life Calculation

Implicit Value of a Person's Life Calculation

Billy Bob earns $45,000 and faces a .007 probability of dying in a workplace accident. Jim Bob earns $41,000 and faces a .0038 probability of dying in a workplace accident. The two require the same level of skill and training. From this information, what is the implicit value of a person's life?

What is the implicit value of a person's life? $1,250,000 Explanation: The implicit value of a person's life can be found by using the elasticity approach. On comparing the change/reduction in earnings with the change/reduction in probability of dying in a workplace accident. Given: Billy Bob earns $45000 with a 0.007 probability of accident, whereas, Jim Bob earns $41000 with a 0.0038 probability of accident. Thus, value of life = ($45000 - $41000) / (0.007 - 0.0038) = $1,250,000
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