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The Discount Rate and the Value of Remaining Years of Life

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  • John Hartwick

    () (Queen's University)

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://qed.econ.queensu.ca/working_papers/papers/qed_wp_1191.pdf
File Function: First version 2008
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Bibliographic 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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Keywords: Discount rate; Value of life;

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  1. Azfar, Omar, 1999. "Rationalizing hyperbolic discounting," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 245-252, February.
  2. Kevin M. Murphy & Robert H. Topel, 2005. "The Value of Health and Longevity," NBER Working Papers 11405, National Bureau of Economic Research, Inc.
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