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Risk Aversion and the Value of Risk to Life

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Author Info
Bommier, Antoine
Villeneuve, Bertrand

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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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11943.

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Date of creation: 10 Jun 2008
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Handle: RePEc:pra:mprapa:11943

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Related research
Keywords: Value of Statistical Life; Lifecycle Behavior; Cost-benefit Analysis;

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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
J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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  3. Ariel Rubinstein, 2003. ""Economics and Psychology"? The Case of Hyperbolic Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1207-1216, November. [Downloadable!] (restricted)
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  24. Antoine Bommier, 2006. "Uncertain Lifetime And Intertemporal Choice: Risk Aversion As A Rationale For Time Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1223-1246, November. [Downloadable!] (restricted)
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