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Risk Aversion and the Value of Risk to Life

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  • Antoine Bommier
  • Bertrand Villeneuve

Abstract

This paper argues for an alternative methodology to estimate the value of risk to life. By relaxing the assumption of additive separability, we introduce risk aversion with respect to the length of life and show that the extended model better fits available data. This is crucial for the extrapolation stage that the evaluation of life-saving programs systematically requires. Current practice, we show, puts too little weight on the young. Our correction surpasses 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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-09/cesifo1_wp1267.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1267.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1267

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Keywords: value of statistical life; lifecycle behavior; cost-benefit analysis;

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References

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Citations

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Cited by:
  1. 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).
  2. 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.
  3. Dionne, Georges & Lebeau, Martin, 2010. "Le calcul de la valeur statistique d'une vie humaine
    [Estimation of statistical value of life]
    ," MPRA Paper 37573, University Library of Munich, Germany.
  4. 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.
  5. Antoine Bommier, 2006. "Mortality, Time Preference and Life-Cycle Models," Working Papers hal-00441888, HAL.
  6. 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.
  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. Huaxiong Huang & Moshe A. Milevsky & Thomas S. Salisbury, 2012. "Optimal retirement consumption with a stochastic force of mortality," Papers 1205.2295, arXiv.org.
  10. 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.

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