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The Value of a Statistical Life under Ambiguity Aversion

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  • Nicolas Treich

Abstract

We show that ambiguity aversion increases the value of a statistical life as soon as the marginal utility of wealth is higher if alive than dead. The intuition is that ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the “dead anyway” effect. We suggest, however, that ambiguity aversion should usually have a modest effect on the prevention of ambiguous mortality risks within benefit-cost analysis, and can hardly justify the substantial “ambiguity premium” apparently embodied in environmental policy-making.

Suggested Citation

  • Nicolas Treich, 2008. "The Value of a Statistical Life under Ambiguity Aversion," CESifo Working Paper Series 2291, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2291
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    More about this item

    Keywords

    ambiguity; value-of-a-statistical-life; uncertainty; risk-aversion; willingness-to-pay; benefit-cost analysis; environmental risk; health policy;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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