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The value of a statistical life under ambiguity aversion

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  • Treich, Nicolas

Abstract

The paper shows that ambiguity aversion increases the value of a statistical life if the marginal utility of an increase in wealth is larger if one is alive rather than dead. Intuitively, ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the "dead anyway" effect. A numerical example suggests, however, that ambiguity aversion cannot justify the substantial "ambiguity premium" apparently embodied in environmental policy-making. The paper also shows that ambiguity aversion decreases the marginal cost of individual self-protection effort but may well decrease its marginal benefit, so that the total effect of ambiguity aversion on self-protection is unclear.

Suggested Citation

  • Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    • Handle: RePEc:eee:jeeman:v:59:y:2010:i:1:p:15-26
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    More about this item

    Keywords

    Ambiguity Value of a statistical life Uncertainty Risk aversion Willingness to pay Benefit-cost analysis Environmental risks Health policy;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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