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Explaining Diversities in Age-Specific Life Expectancies and Values of Life Saving: A Numerical Analysis

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  • Isaac Ehrlich
  • Yong Yin

Abstract

Little attempt has been made so far to quantify the extent to which individual willingness to spend on life protection may account for the observed trends and diversities in agespecific life expectancies across individuals and over time. We address these issues via calibrated simulations of a dynamic, life-cycle model of life protection in which life's end is a stochastic event, age-specific mortality risks are endogenous variables, and spending on life protection is set jointly with related insurance options: life insurance as well as annuities. A unique feature of our model is that it links age-specific mortality risks and implicit private values-of-life-saving (VLS) as "dual variables", and estimates them jointly. It also offers new insights about the concept and measurement of VLS. Life protection is estimated to have a non-negligible impact on age-specific life expectancies. It can account for significant portions of observed inequalities in life expectancies across population groups and over time, as well as for a wide range of empirical estimates of VLS produced via the conventional "willingness to pay" approach.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10759.

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Date of creation: Sep 2004
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Publication status: published as Ehrlich, Isaac and Yong Yin. "Explaining Diversities In Age-Specific Life Expectancies And Values Of Life Saving: A Numerical Analysis," Journal of Risk and Uncertainty, 2005, v31(2,Sep), 129-162.
Handle: RePEc:nbr:nberwo:10759

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  1. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
  2. Kniesner Thomas J & Viscusi W. Kip & Ziliak James P, 2006. "Life-Cycle Consumption and the Age-Adjusted Value of Life," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-36, January.
  3. Dana Goldman & Darius Lakdawalla, 2001. "Understanding Health Disparities Across Education Groups," NBER Working Papers 8328, National Bureau of Economic Research, Inc.
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  7. W. Kip Viscusi & Joseph E. Aldy, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," NBER Working Papers 9487, National Bureau of Economic Research, Inc.
  8. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-77, June.
  9. Gerdtham, U. -G. & Johannesson, M. & Lundberg, L. & Isacson, D., 1999. "The demand for health: results from new measures of health capital," European Journal of Political Economy, Elsevier, vol. 15(3), pages 501-521, September.
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  12. Johansson, Per-Olov, 2001. "Is there a meaningful definition of the value of a statistical life?," Journal of Health Economics, Elsevier, vol. 20(1), pages 131-139, January.
  13. Olivia S. Mitchell, 2001. "Developments in Decumulation: The Role of Annuity Products in Financing Retirement," NBER Working Papers 8567, National Bureau of Economic Research, Inc.
  14. Ehrlich, Isaac, 2000. "Uncertain lifetime, life protection, and the value of life saving," Journal of Health Economics, Elsevier, vol. 19(3), pages 341-367, May.
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As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Economics of Welfare > Health Economics > Value of Life
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Cited by:
  1. Hugo Benitez-Silva & Huan Ni, 2005. "Health Status and Health Dynamics in an Empirical Model of Expected Longevity," Department of Economics Working Papers 05-14, Stony Brook University, Department of Economics.
  2. Titus J. Galama & Hans van Kippersluis, 2013. "Health Inequalities through the Lens of Health Capital Theory: Issues, Solutions, and Future Directions," Tinbergen Institute Discussion Papers 13-076/V, Tinbergen Institute.
  3. Joseph E. Aldy & W. Kip Viscusi, 2008. "Adjusting the Value of a Statistical Life for Age and Cohort Effects," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 573-581, August.
  4. Antoine Bommier & Bertrand Villeneuve, 2010. "Risk Aversion and the Value of Risk to Life," CER-ETH Economics working paper series 10/133, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Guang-Zhen Sun & Yew-Kwang Ng, 2008. "Finite Life Expectancy And The Age-Dependent Value Of A Statistical Life," Development Research Unit Working Paper Series 12/08, Monash University, Department of Economics.
  6. Viscusi, W. Kip & Aldy, Joseph, 2006. "Labor Market Estimates of the Senior Discount for the Value of Statistical Life," Discussion Papers dp-06-12, Resources For the Future.
  7. Beni­tez-Silva, Hugo & Ni, Huan, 2008. "Health status and health dynamics in an empirical model of expected longevity," Journal of Health Economics, Elsevier, vol. 27(3), pages 564-584, May.
  8. Ehrlich, Isaac & Yin, Yong, 2014. "Equilibrium Health Spending and Population Aging in a Model of Endogenous Growth: Will the GDP Share of Health Spending Keep Rising?," IZA Discussion Papers 7928, Institute for the Study of Labor (IZA).
  9. Jihong Ding & Minglai Zhu, 2009. "A theoretical investigation of the reformed public health insurance in urban China," Frontiers of Economics in China, Springer, vol. 4(1), pages 1-29, March.
  10. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  11. Hugo Benitez-Silva & Huan Ni, 2007. "Health Status and Health Dynamics in an Empirical Model of Expected Longevity," Department of Economics Working Papers 07-04, Stony Brook University, Department of Economics.
  12. Isaac Ehrlich, 2007. "The Mystery of Human Capital as Engine of Growth, or Why the US Became the Economic Superpower in the 20th Century," NBER Working Papers 12868, National Bureau of Economic Research, Inc.
  13. Tamara Fioroni, 2009. "Optimal savings and heallth spending over the life cycle," CHILD Working Papers wp09_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.

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