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The discount rate and the value of remaining years of life

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  • Hartwick, John M.

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. We employ the Makeham “model” of life expectancy and Murphy–Topel “values of life years” in our calculations.

Suggested Citation

  • Hartwick, John M., 2012. "The discount rate and the value of remaining years of life," Economics Letters, Elsevier, vol. 114(1), pages 51-53.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:51-53
    DOI: 10.1016/j.econlet.2011.08.003
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    References listed on IDEAS

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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, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October.
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    More about this item

    Keywords

    Product cycle; Innovation; Mature market;
    All these keywords.

    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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