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Statistical vs. identified lives in benefit-cost analysis

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  • James Hammitt

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  • Nicolas Treich

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Abstract

Evaluation of projects that affect mortality risk usually assumes that risk changes are small and similar across individuals. In reality, risks differ among individuals and information about risk heterogeneity determines the extent to which affected lives are “statistical” or “identified” and influences the outcome of benefit-cost analysis (BCA). The effects of information about risk heterogeneity on BCA depend on, inter alia, whether information concerns heterogeneity of baseline or change in risk and whether valuation uses compensating or equivalent variation. BCA does not systematically favor identified over statistical lives. We suggest some political factors that may explain the apparent public bias. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • James Hammitt & Nicolas Treich, 2007. "Statistical vs. identified lives in benefit-cost analysis," Journal of Risk and Uncertainty, Springer, vol. 35(1), pages 45-66, August.
  • Handle: RePEc:kap:jrisku:v:35:y:2007:i:1:p:45-66 DOI: 10.1007/s11166-007-9015-8
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Adler, Matthew D. & Hammitt, James K. & Treich, Nicolas, 2014. "The social value of mortality risk reduction: VSL versus the social welfare function approach," Journal of Health Economics, Elsevier, vol. 35(C), pages 82-93.
    2. Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    3. H. Spencer Banzhaf, 2014. "Retrospectives: The Cold-War Origins of the Value of Statistical Life," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 213-226, Fall.
    4. Lisa A. Robinson & James K. Hammitt, 2013. "Behavioral economics and the conduct of benefit–cost analysis: towards principles and standards," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 10, pages 317-363 Edward Elgar Publishing.
    5. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters,in: A Handbook of Transport Economics, chapter 17 Edward Elgar Publishing.
    6. Adler, Matthew & Hammitt, James & Treich, Nicolas, 2012. "The Social Value of Mortality Risk Reduction: VSL vs. the Social Welfare Function Approach," LERNA Working Papers 12.08.365, LERNA, University of Toulouse.
    7. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters,in: A Handbook of Transport Economics, chapter 17 Edward Elgar Publishing.
    8. Maureen Cropper & James K. Hammitt & Lisa A. Robinson, 2011. "Valuing Mortality Risk Reductions: Progress and Challenges," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 313-336, October.
    9. Christoph Rheinberger, 2011. "A Mixed Logit Approach to Study Preferences for Safety on Alpine Roads," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(1), pages 121-146, May.
    10. Mario Andres Fernandez & Douglas Shaw, 2013. "Willingness to pay for intervention policies related to HIV/AIDS: a theoretical framework with endogenous risk, perceived effectiveness and altruism," Economics Bulletin, AccessEcon, vol. 33(2), pages 1457-1467.
    11. 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.
    12. repec:kap:jrisku:v:55:y:2017:i:1:d:10.1007_s11166-017-9265-z is not listed on IDEAS
    13. repec:kap:enreec:v:67:y:2017:i:3:d:10.1007_s10640-016-0033-3 is not listed on IDEAS
    14. Christoph M. Rheinberger & Nicolas Treich, 2017. "Attitudes Toward Catastrophe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 609-636.

    More about this item

    Keywords

    Benefit-cost analysis; Value of statistical life; Information; Heterogeneity; D61; D81; H42; I18;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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