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The value of a statistical life under ambiguity aversion

  • Treich, Nicolas

The paper shows that ambiguity aversion increases the value of a statistical life if the marginal utility of an increase in wealth is larger if one is alive rather than dead. Intuitively, ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the "dead anyway" effect. A numerical example suggests, however, that ambiguity aversion cannot justify the substantial "ambiguity premium" apparently embodied in environmental policy-making. The paper also shows that ambiguity aversion decreases the marginal cost of individual self-protection effort but may well decrease its marginal benefit, so that the total effect of ambiguity aversion on self-protection is unclear.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 59 (2010)
Issue (Month): 1 (January)
Pages: 15-26

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Handle: RePEc:eee:jeeman:v:59:y:2010:i:1:p:15-26
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