Valuing Children’s Statistical Lives: A Conceptual Framework

A longstanding puzzle for regulatory theory and practice has been the valuation of children’s lives, or more precisely, the valuation of mortality risks faced by children. There are data about parents’ willingness to pay (WTP) to reduce such risks, and that data might be used to estimate the value per statistical life (VSL) for children. The problem is that any such VSL comes from the parents’ valuations; it might not adequately capture the welfare effects of risk reduction for children themselves. It can be shown, however, that use of parental WTP, and the resulting VSL, is justified on four assumptions: (1) parents have adequate information, (2) parents do not suffer from a relevant behavioral bias, (3) parents have a limited budget for expenditures on their children, and regulation would amount to a forced exchange, producing a dollar-for-dollar reduction from that budget, and (4) parents are sufficiently motivated to care about their children’s welfare, so that parental judgments about how to allocate limited resources for their children promote their children’s welfare. If we relax one or more of these assumptions, the appropriate VSL for children might be different from, and potentially higher than, the VSL that emerges from use of parental WTP. Implementing the proposed framework presents serious but tractable empirical challenges.