Keith Vodden Dr. Douglas Smith - Transports Canada

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Appendix A—Detail on Calculations of the Ontario Model • Review and update the Canadian results of Gunderson and Hyatt based on improved estimation techniques related to risk preferences and selection of individuals into different occupational risks. These estimates are larger than earlier results and have not been the source of any challenge or criticism in the literature. These results will provide an “upper bound” WTP estimate of the core fatality and injury parameters. • The mean value of the upper and lower bound estimates provides the central estimating result used in our analysis. We provide sensitivity analyses using lower and upper bound estimates of these parameters. Based on these methods the core parameters for the human consequences (death, activity day, partial and total disability) associated with motor vehicle collisions are provided in Exhibit A-17. The values for short-term disability by injury severity are derived from the core parameter for activity day value and the estimate of activity days lost in Exhibit A-10. Exhibit A-17 Core WTP Parameters for Human Consequences (2004$) Value by type of effect by scenario: Type of effect Upper bound Lower bound Mean value Death $19.7 million $7.5 million $13.6 million Activity Day used for short term disabling injury below: $2,885 $577 $1,730 Per major injury $215,510 $43,102 $129,231 Per minor injury $43,275 $8,655 $25,950 Per minimal injury $2,308 $462 $1,384 Partial disability $1,201,977 $240,395 $721,186 Total disability $2,403,954 $480,790 $1,442,372 Note: Variables above are constructed as described in the text. In Exhibit A-17, the lower bound estimates consist of the updated values estimated by Vodden et al. (1994). These values, estimated using data from Statistics Canada’s 1987 Labour Market Activity Survey, have been updated to 2004. The dependent variable in these regression model estimates is the wage rate so that we have inflated the 1987 value of $4.7 million to $7.8 million using Statistics Canada data on wage rates (The Labour Market cat. No: 71-222-XWE). This adjustment includes an inflation adjustment to retain the real value of the value of statistical life variable and also includes an increasing real wage factor that captures the positive income elasticity of the TNS Canadian Facts, Social and Policy Research 139
Analysis and Estimation of the Social Cost of Motor Vehicle Collisions in Ontario demand for safety as described in Viscusi and Aldy (2003). The lower bound for the Activity Day variable and the severe injury variable are calculated in the same way. The upper bound estimates are based on the models estimated by Gunderson and Hyatt (2001). Their central point is that earlier estimates of the value of a statistical life may under-estimate the true value of this variable. The potential bias occurs because other models fail to account for risk preferences that may vary with income and do not control for selection factors based on risk preferences. In the case of the selection issue, this means that workers with less risk aversion will accept (self-select into) higher risk jobs and because they are less risk averse will demand a smaller compensating wage differential for exposure to risk. The smaller compensating wage differential then underestimates the required compensation of “average” members of the population for exposure to risk, thereby under-estimating the costs associated with workplace and other risks including motor vehicle risks. The value of a statistical life estimated by Gunderson and Hyatt is $12.75 million, expressed in 1988 dollars. Converting this to 2004 dollars using the wage index described above gives the value of $19.7 million shown in Exhibit A-16. The Gunderson and Hyatt models do not compute the Activity Day and Severe Injury variables that we plan to use in our modeling. Their overall results indicate that their correction factors would cause the values to increase by a factor of 5. As a result, we use this factor to calculate the upper bounds for these variables in Exhibit A-17. The final column of Exhibit A-15 calculates the mean of the upper and lower bound estimates. 2. Discounted Future Earnings (DFE) Estimates The discounted future earnings approach measures losses in productive activity in the workplace and in household activity for those affected by motor vehicle collisions. Losses through three main types of human consequences are measured: fatalities, permanent disabilities (total and partial), and temporary disabilities and injuries. More detail on the DFE approach may be found in Appendix A. Estimates are summarized in Exhibit A-18. Exhibit A-18 DFE estimates for human consequences (2004 $) Injury Severity Average/case Fatality $1.1 million Permanent Total Disability $1.1 million Permanent Partial Disability $189,081 Major Injury* $7,709 Minor Injury* $1,136 Minimal Injury* $36 * Excluding those resulting in permanent disability. 140 TNS Canadian Facts, Social and Policy Research
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TP 14800F Analysis and Estimation o
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APPENDIX A: DETAIL ON CALCULATIONS
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• Large truck. Collisions involvi
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ABBREVIATIONS CAC Criteria Air Cont
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Analysis and Estimation of the Soci
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III ONTARIO MODEL This chapter desc
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Ontario Model redistribution. Simil
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Ontario Model • Pedestrian Injure
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Ontario Model Based on this analysi
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Ontario Model Step 3 Allocate addit
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Ontario Model damaged based on this
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Ontario Model 1. Number of total an
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Ontario Model 2.99; specialist—1.
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Ontario Model 5. Tow trucks Tow tru
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Ontario Model Exhibit III-5 Core WT
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Ontario Model We combine this value
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Ontario Model 6. Ambulance The Onta
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Ontario Model individuals who self-
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Ontario Model threatening injury, p
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Ontario Model d) Additional Polluti
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Ontario Model VARIABLE DATA LOST TI
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Ontario Model We have no data to gu
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V ONTARIO SUB-MODELS AND THEIR SOCI
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Ontario Sub-Models and Their Social
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APPENDIX E: REFERENCES Audrey, J. a
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Keith Vodden Dr. Douglas Smith - Transports Canada

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