Valuation of Human Health: An Integrated Model of Willingness to Pay for Mortality and Morbidity Risk Reductions

This paper develops and applies an integrated model of human mortality and morbidity valuation that is consistent with principles of welfare economics. The standard expected utility model of one person facing two health states (alive and dead) is extended to a setting in which two family members (a parent and a child) face three health states (healthy, sick, and dead). A key finding is that total health benefits of public programs equate to the sum of willingness to pay for reduced mortality risk plus a fraction of the willingness to pay for reduced morbidity risk. Implications of the integrated model are tested using two field data sets from the U.S. on skin cancer and leukemia risk reductions. Results obtained show how the integrated model can be used to increase the accuracy of health benefit estimation for benefit-cost analyses as well as for the design of public hazard reduction programs.