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The Discount Rate and the Value of Remaining Years of Life

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Author Info
John Hartwick () (Queen's University)

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Abstract

We back out an estimate of a personal discount rate of between 3 and 4 percent for a person with a life expectancy of 74 years who dies at age 30 (or 40) and has a value of statistical life of $6.3 million. Central to these calculations is the series generated by Murphy and Topel of value of life years (the dollar value of consumption plus the dollar value of leisure, with some smoothing for income in retirement). We employ the Makeham "model" of life expectancy in our calculations.

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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1191.pdf
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File Function: First version 2008
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1191.

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Length: 9 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:qed:wpaper:1191

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Related research
Keywords: Discount rate; Value of life;

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Find related papers by JEL classification:
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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  1. Azfar, Omar, 1999. "Rationalizing hyperbolic discounting," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 245-252, February. [Downloadable!] (restricted)
  2. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October. [Downloadable!] (restricted)
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