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Risk Aversion and the Value of Risk to Life

  • Villeneuve, Bertrand
  • Bommier, Antoine

The standard literature on the value of life relies on Yaari’s (1965) model, which includes an implicit assumption of risk neutrality with respect to life duration. To overpass this limitation, we extend the theory to a simple variety of nonadditively separable preferences. The enlargement we propose is relevant for the evaluation of life-saving programs: current practice, we estimate, puts too little weight on mortality risk reduction of the young. Our correction exceeds in magnitude that introduced by the switch from the notion of number of lives saved to the notion of years of life saved.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4812.

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Date of creation: 2012
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Publication status: Published in The Journal of Risk and Insurance, 2012, Vol. 79, no. 1. pp. 77-104.Length: 27 pages
Handle: RePEc:dau:papers:123456789/4812
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