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Valuing Health Risk Changes Using a Life-Cycle Consumption Framework

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  • Stephen C. Newbold

Abstract

Government agencies routinely use the “value of a statistical life” (VSL) in benefit-cost analyses of proposed environmental and safety regulations. Here I review an alternative approach for valuing health risks using a “life-cycle consumption framework.” This framework is based on an explicit individual-level lifetime utility function over health and income at all ages, and so could be used to examine any pattern of health risk changes over a person’s lifespan. I discuss several potential advantages of this framework, both positive and normative. From a positive perspective, this framework can support a functional benefit transfer approach that is more flexible and potentially more accurate than the standard point-value benefit transfer approach based on the VSL, and it can be used to evaluate mortality and morbidity effects simultaneously in an internally consistent model. From a normative perspective, it provides a natural foundation for a social welfare function and therefore could facilitate a unified evaluation of efficiency and equity, as a supplement to traditional benefit-cost analysis.

Suggested Citation

  • Stephen C. Newbold, 2011. "Valuing Health Risk Changes Using a Life-Cycle Consumption Framework," NCEE Working Paper Series 201103, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Apr 2011.
  • Handle: RePEc:nev:wpaper:wp201103
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    File URL: https://www.epa.gov/environmental-economics/working-paper-valuing-health-risk-changes-using-life-cycle-consumption
    File Function: First version, 2011
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    References listed on IDEAS

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    More about this item

    Keywords

    VSL; life-cycle model; benefit-cost analysis; social welfare analysis; QALY; health-wealth tradeoff;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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