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Risk Aversion and the Value of Risk to Life

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  • Antoine Bommier
  • Bertrand Villeneuve

Abstract

The standard literature on the value of life relies on Yaari’s (1965) model, which includes an implicit assumption of risk neutrality with respect to life duration. To overpass this limitation, we extend the theory to a simple variety of nonadditively separable preferences. The enlargement we propose is relevant for the evaluation of life-saving programs: current practice, we estimate, puts too little weight on mortality risk reduction of the young. Our correction exceeds in magnitude that introduced by the switch from the notion of number of lives saved to the notion of years of life saved.

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Bibliographic Info

Article provided by The American Risk and Insurance Association in its journal The Journal of Risk and Insurance.

Volume (Year): 79 (2012)
Issue (Month): 1 (03)
Pages: 77-104

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Handle: RePEc:bla:jrinsu:v:79:y:2012:i:1:p:77-104

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Citations

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Cited by:
  1. Strand, Jon, 2006. "Valuation of environmental improvements in continuous time with mortality and morbidity effects," Resource and Energy Economics, Elsevier, vol. 28(3), pages 229-241, August.
  2. Delprat, Gaëtan & Leroux, Marie-Louise & Michaud, Pierre-Carl, 2013. "Evidence on Individual Preferences for Longevity Risk," IZA Discussion Papers 7317, Institute for the Study of Labor (IZA).
  3. Dionne, Georges & Lebeau, Martin, 2010. "Le calcul de la valeur statistique d’une vie humaine," L'Actualité Economique, Société Canadienne de Science Economique, vol. 86(4), pages 487-530, décembre.
  4. Antoine Bommier, 2006. "Mortality, Time Preference and Life-Cycle Models," Working Papers hal-00441888, HAL.
  5. Péter Hudomiet & Robert J. Willis, 2012. "Estimating Second Order Probability Beliefs from Subjective Survival Data," NBER Working Papers 18258, National Bureau of Economic Research, Inc.
  6. Huaxiong Huang & Moshe A. Milevsky & Thomas S. Salisbury, 2012. "Optimal retirement consumption with a stochastic force of mortality," Papers 1205.2295, arXiv.org.
  7. Antoine Bommier, 2008. "Rational Impatience ?," Working Papers hal-00441880, HAL.
  8. Antoine Bommier, 2005. "Life-Cycle Theory for Human Beings," Working Papers hal-00441890, HAL.
  9. James Hammitt, 2013. "Admissible utility functions for health, longevity, and wealth: integrating monetary and life-year measures," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 311-325, December.
  10. Huang, Huaxiong & Milevsky, Moshe A. & Salisbury, Thomas S., 2012. "Optimal retirement consumption with a stochastic force of mortality," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 282-291.

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