Valuing Health Risk Changes Using a Life-Cycle Consumption Framework
AbstractGovernment agencies routinely use the “value of a statistical life” (VSL) in benefit-cost analyses of proposed environmental and safety regulations. Here I review an alternative approach for valuing health risks using a “life-cycle consumption framework.” This framework is based on an explicit individual-level lifetime utility function over health and income at all ages, and so could be used to examine any pattern of health risk changes over a person’s lifespan. I discuss several potential advantages of this framework, both positive and normative. From a positive perspective, this framework can support a functional benefit transfer approach that is more flexible and potentially more accurate than the standard point-value benefit transfer approach based on the VSL, and it can be used to evaluate mortality and morbidity effects simultaneously in an internally consistent model. From a normative perspective, it provides a natural foundation for a social welfare function and therefore could facilitate a unified evaluation of efficiency and equity, as a supplement to traditional benefit-cost analysis.
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Bibliographic InfoPaper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 201103.
Length: 29 pages
Date of creation: Apr 2011
Date of revision: Apr 2011
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VSL; life-cycle model; benefit-cost analysis; social welfare analysis; QALY; health-wealth tradeoff;
Find related papers by JEL classification:
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-03-08 (Economics of Ageing)
- NEP-ALL-2012-03-08 (All new papers)
- NEP-ENV-2012-03-08 (Environmental Economics)
- NEP-HEA-2012-03-08 (Health Economics)
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