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The Value of a Statistical Life under Ambiguity Aversion

  • Nicolas Treich

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.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2291.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2291
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