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Risk Aversion and the Value of Risk to Life

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  • Villeneuve, Bertrand
  • Bommier, Antoine

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

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4812.

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Date of creation: 2012
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Publication status: Published in Journal of Risk and Insurance, 2012, Vol. 79, no. 1. pp. 77-104.Length: 27 pages
Handle: RePEc:dau:papers:123456789/4812

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Keywords: Lifecycle Behavior; Life Insurance; Value of Statistical Life; Cost-Benefit Analysis;

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Citations

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Cited by:
  1. Antoine Bommier, 2005. "Life-Cycle Theory for Human Beings," Working Papers hal-00441890, HAL.
  2. Gaëtan Delprat & Marie-Louise Leroux & Pierre-Carl Michaud, 2013. "Evidence on Individual Preferences for Longevity Risk," CESifo Working Paper Series 4196, CESifo Group Munich.
  3. Georges Dionne & Martin Lebeau, 2010. "Le calcul de la valeur statistique d'une vie humaine," Cahiers de recherche 1041, CIRPEE.
  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. 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. Antoine Bommier, 2006. "Mortality, Time Preference and Life-Cycle Models," Working Papers hal-00441888, HAL.
  7. 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.
  8. 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.
  9. Antoine Bommier, 2008. "Rational Impatience ?," Working Papers hal-00441880, HAL.
  10. Huaxiong Huang & Moshe A. Milevsky & Thomas S. Salisbury, 2012. "Optimal retirement consumption with a stochastic force of mortality," Papers 1205.2295, arXiv.org.

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