Heterogeneity in the Value of Life

We develop a numerical life-cycle model with choice over consumption and leisure, stochastic mortalityand 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 thisliterature, 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 reconcilethe 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.