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The Willingness to Accept Value of Statistical Life Relative to the Willingness to Pay Value: Evidence and Policy Implications

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  • Jagadish Guria
  • Joanne Leung
  • Michael Jones-Lee
  • Graham Loomes

Abstract

Large disparities between willingness to accept (WTA) and willingness to pay (WTP) based values of statistical life are commonly encountered in empirical studies. Standard economic theory suggests that if a public good is easily substitutable there should be no marked disparity between WTA and WTP values for the good, though the disparity increases with reduced substitutability. However, psychologists have shown that people often treat gains and losses asymmetrically and tend to require a substantially larger increase in wealth to compensate for a loss than the amount they would be willing to pay for an equivalent gain. Although most transport projects may aim to improve safety, situations arise when a relaxation of an existing regulation saves resources but increases the risk of death and injuries. A survey was recently carried out in New Zealand to determine people’s willingness to pay to reduce road risks and their willingness to accept compensation for an increase in risk. This paper reports the disparity observed between the two measures and considers some of the problems posed for policymakers. Copyright Springer 2005

Suggested Citation

  • Jagadish Guria & Joanne Leung & Michael Jones-Lee & Graham Loomes, 2005. "The Willingness to Accept Value of Statistical Life Relative to the Willingness to Pay Value: Evidence and Policy Implications," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 113-127, September.
  • Handle: RePEc:kap:enreec:v:32:y:2005:i:1:p:113-127
    DOI: 10.1007/s10640-005-6030-6
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    Citations

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    Cited by:

    1. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    2. George Parsons & Kelley Myers, 2017. "Fat tails and truncated bids in contingent valuation: an application to an endangered shorebird species," Chapters, in: Daniel McFadden & Kenneth Train (ed.), Contingent Valuation of Environmental Goods, chapter 2, pages 17-42, Edward Elgar Publishing.
    3. Ami, Dominique & Aprahamian, Frédéric & Chanel, Olivier & Joulé, Robert-Vincent & Luchini, Stéphane, 2014. "Willingness to pay of committed citizens: A field experiment," Ecological Economics, Elsevier, vol. 105(C), pages 31-39.
    4. Soma Bhattacharya & Anna Alberini & Maureen Cropper, 2007. "The value of mortality risk reductions in Delhi, India," Journal of Risk and Uncertainty, Springer, vol. 34(1), pages 21-47, February.
    5. Lisa A. Robinson & James K. Hammitt, 2013. "Behavioral economics and the conduct of benefit–cost analysis: towards principles and standards," Chapters, in: Scott O. Farrow & Richard Zerbe, Jr. (ed.), Principles and Standards for Benefit–Cost Analysis, chapter 10, pages 317-363, Edward Elgar Publishing.
    6. Ami, Dominique & Aprahamian, Frédéric & Chanel, Olivier & Luchini, Stéphane, 2018. "When do social cues and scientific information affect stated preferences? Insights from an experiment on air pollution," Journal of choice modelling, Elsevier, vol. 29(C), pages 33-46.
    7. Thijs Dekker & Roy Brouwer & Marjan Hofkes & Klaus Moeltner, 2011. "The Effect of Risk Context on the Value of a Statistical Life: a Bayesian Meta-model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(4), pages 597-624, August.
    8. Loomes, Graham, 2006. "(How) Can we value health, safety and the environment?," Journal of Economic Psychology, Elsevier, vol. 27(6), pages 713-736, December.
    9. Ruiz, Tomás & Bernabé, José C., 2014. "Measuring factors influencing valuation of nonmotorized improvement measures," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 195-211.
    10. Susan Chilton & Michael Jones-Lee & Rebecca McDonald & Hugh Metcalf, 2012. "Does the WTA/WTP ratio diminish as the severity of a health complaint is reduced? Testing for smoothness of the underlying utility of wealth function," Journal of Risk and Uncertainty, Springer, vol. 45(1), pages 1-24, August.
    11. Hao Li & Xiaohui Yang & Xiao Zhang & Yuyan Liu & Kebin Zhang, 2018. "Estimation of Rural Households’ Willingness to Accept Two PES Programs and Their Service Valuation in the Miyun Reservoir Catchment, China," Sustainability, MDPI, Open Access Journal, vol. 10(1), pages 1-19, January.
    12. Donna E. Sweet & Frederick L. Altice & Calvin J. Cohen & Björn Vandewalle, 2016. "Cost-Effectiveness of Single- Versus Generic Multiple-Tablet Regimens for Treatment of HIV-1 Infection in the United States," PLOS ONE, Public Library of Science, vol. 11(1), pages 1-19, January.
    13. Frondel Manuel & Sommer Stephan, 2017. "Der Wert von Versorgungssicherheit mit Strom: Evidenz für deutsche Haushalte," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 66(3), pages 294-317, December.
    14. Courard-Hauri David & Lauer Stephen A., 2012. "Taking "All Men Are Created Equal" Seriously: Toward a Metric for the Intergroup Comparison of Utility Functions Through Life Values," Journal of Benefit-Cost Analysis, De Gruyter, vol. 3(3), pages 1-30, August.
    15. Jones-Lee, M. & Aven, T., 2009. "The role of social cost–benefit analysis in societal decision-making under large uncertainties with application to robbery at a cash depot," Reliability Engineering and System Safety, Elsevier, vol. 94(12), pages 1954-1961.

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