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The Value of a Statistical Life under Ambiguity Aversion

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Author Info
Nicolas Treich ()

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Abstract

We show that ambiguity aversion increases the value of a statistical life as soon as the marginal utility of wealth is higher if alive than dead. The intuition is that ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the “dead anyway” effect. We suggest, however, that ambiguity aversion should usually have a modest effect on the prevention of ambiguous mortality risks within benefit-cost analysis, and can hardly justify the substantial “ambiguity premium” apparently embodied in environmental policy-making.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2291.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2291

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Related research
Keywords: ambiguity; value-of-a-statistical-life; uncertainty; risk-aversion; willingness-to-pay; benefit-cost analysis; environmental risk; health policy;

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Find related papers by 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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    Other versions:
  2. Gollier, Christian, 2009. "Does Ambiguity Aversion Reinforce Risk Aversion? Applications to Portfolio Choices and Asset Pricing," IDEI Working Papers 357, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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    Other versions:
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  20. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November. [Downloadable!] (restricted)
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  21. Viscusi, W Kip, 1997. "Alarmist Decisions with Divergent Risk Information," Economic Journal, Royal Economic Society, vol. 107(445), pages 1657-70, November. [Downloadable!] (restricted)
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  26. W. Kip Viscusi & James T. Hamilton, 1999. "Are Risk Regulators Rational? Evidence from Hazardous Waste Cleanup Decisions," American Economic Review, American Economic Association, vol. 89(4), pages 1010-1027, September. [Downloadable!] (restricted)
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