A Note on the Estimation of Job Amenities and Labor Productivity

TL;DR

This paper develops a maximum likelihood estimator to jointly assess job amenities and labor productivity from market data, applying it to estimate the Value of Statistical Life using US wage-risk data.

Contribution

It introduces a novel estimator that simultaneously fits matching patterns and wage curves, applicable to various assignment problems including valuation of job amenities.

Findings

Estimated Value of Statistical Life at $6.3 million in 2017 US data

Estimator effectively captures matching patterns and wage differentials

Applicable to diverse matching market analyses

Abstract

This paper introduces a maximum likelihood estimator of the value of job amenities and labor productivity in a single matching market based on the observation of equilibrium matches and wages. The estimation procedure simultaneously fits both the matching patterns and the wage curve. While our estimator is suited for a wide range of assignment problems, we provide an application to the estimation of the Value of a Statistical Life using compensating wage differentials for the risk of fatal injury on the job. Using US data for 2017, we estimate the Value of Statistical Life at \$ 6.3 million (\$2017).