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Statistical vs. identified lives in benefit-cost analysis

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  • James Hammitt

    ()

  • Nicolas Treich

    ()

Abstract

Evaluation of projects that affect mortality risk usually assumes that risk changes are small and similar across individuals. In reality, risks differ among individuals and information about risk heterogeneity determines the extent to which affected lives are “statistical” or “identified” and influences the outcome of benefit-cost analysis (BCA). The effects of information about risk heterogeneity on BCA depend on, inter alia, whether information concerns heterogeneity of baseline or change in risk and whether valuation uses compensating or equivalent variation. BCA does not systematically favor identified over statistical lives. We suggest some political factors that may explain the apparent public bias. Copyright Springer Science+Business Media, LLC 2007

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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 35 (2007)
Issue (Month): 1 (August)
Pages: 45-66

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Handle: RePEc:kap:jrisku:v:35:y:2007:i:1:p:45-66

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Web page: http://www.springerlink.com/link.asp?id=100299

Related research

Keywords: Benefit-cost analysis; Value of statistical life; Information; Heterogeneity; D61; D81; H42; I18;

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Cited by:
  1. Christoph Rheinberger, 2011. "A Mixed Logit Approach to Study Preferences for Safety on Alpine Roads," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(1), pages 121-146, May.
  2. Adler, Matthew & Hammitt, James & Treich, Nicolas, 2012. "The Social Value of Mortality Risk Reduction: VSL vs. the Social Welfare Function Approach," IDEI Working Papers 709, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. 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.
  4. Cropper, Maureen & Hammitt, James & Robinson, Lisa, 2011. "Valuing Mortality Risk Reductions:Progress and Challenges," LERNA Working Papers 11.11.345, LERNA, University of Toulouse.
  5. Mario Andres Fernandez & Douglas Shaw, 2013. "Willingness to pay for intervention policies related to HIV/AIDS: a theoretical framework with endogenous risk, perceived effectiveness and altruism," Economics Bulletin, AccessEcon, vol. 33(2), pages 1457-1467.

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