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Preferences for life-expectancy gains: Sooner or later?

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  • James Hammitt

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  • Tuba Tunçel

Abstract

We assess individuals’ preferences for time paths of reductions in mortality risk yielding a life-expectancy gain of about 1 month. In a survey of more than 1000 French residents, we find substantial coherence and heterogeneity. We elicit pairwise preferences between three perturbations of age- and gender-specific survival curves: transient (reduce hazard for next 10 years), additive (reduce hazard in all future years by subtracting a constant), and proportional (reduce hazard in all future years by a common fraction). The preference order implied by these pairwise responses is transitive for 85% of respondents. The most common preference orders, accounting for more than half the respondents, are strict indifference, proportional ≻ additive ≻ transient, and the inverse of that ranking. These are consistent with globally risk-neutral, risk-seeking, and risk-averse preferences toward longevity, respectively. Choices between one of these scenarios and a latent version that provides no risk reduction for the first 10 or 20 years are consistent with these risk postures. The mean and median consumption-discount rates are 12 and 5% per year, respectively, and the average coefficient of relative risk aversion with respect to financial gambles is about 0.5. Preferences toward the time path of mortality-risk reduction are not strongly associated with individual characteristics, although respondents who are older or exhibit higher consumption-discount rates tend to exhibit less longevity-risk aversion. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • James Hammitt & Tuba Tunçel, 2015. "Preferences for life-expectancy gains: Sooner or later?," Journal of Risk and Uncertainty, Springer, vol. 51(1), pages 79-101, August.
  • Handle: RePEc:kap:jrisku:v:51:y:2015:i:1:p:79-101
    DOI: 10.1007/s11166-015-9217-4
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    References listed on IDEAS

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    Cited by:

    1. Das, Tirthatanmoy & Polachek, Solomon, 2017. "Micro Foundations of Earnings Differences," IZA Discussion Papers 10922, Institute for the Study of Labor (IZA).
    2. James K. Hammitt, 2017. "Valuing Non-Fatal Health Risks: Monetary and Health-Utility Measures," Revue économique, Presses de Sciences-Po, vol. 68(3), pages 335-356.
    3. McDonald, R.L. & Chilton, S.M. & Jones-Lee, M.W. & Metcalf, H.R.T., 2017. "Evidence of variable discount rates and non-standard discounting in mortality risk valuation," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 152-167.
    4. Michael Jones-Lee & Susan Chilton & Hugh Metcalf & Jytte Nielsen, 2015. "Valuing gains in life expectancy: Clarifying some ambiguities," Journal of Risk and Uncertainty, Springer, vol. 51(1), pages 1-21, August.

    More about this item

    Keywords

    Survival; Mortality risk; Risk aversion; Value of statistical life; D6; J17;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income

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