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

  • Shelby Gerking
  • Mark Dickie
  • Marcella Veronesi

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.

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File URL: http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2012-07/$File/2012-07.PDF
File Function: First version, 2012
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Paper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 201207.

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Length: 48 pages
Date of creation: Oct 2012
Date of revision: Oct 2012
Handle: RePEc:nev:wpaper:wp201207
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  1. Evans, Mary F. & Schaur, Georg, 2010. "A quantile estimation approach to identify income and age variation in the value of a statistical life," Journal of Environmental Economics and Management, Elsevier, vol. 59(3), pages 260-270, May.
  2. Day, Brett & Bateman, Ian J. & Carson, Richard T. & Dupont, Diane & Louviere, Jordan J. & Morimoto, Sanae & Scarpa, Riccardo & Wang, Paul, 2012. "Ordering effects and choice set awareness in repeat-response stated preference studies," Journal of Environmental Economics and Management, Elsevier, vol. 63(1), pages 73-91.
  3. Christian A. Vossler & Maurice Doyon & Daniel Rondeau, 2012. "Truth in Consequentiality: Theory and Field Evidence on Discrete Choice Experiments," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 145-71, November.
  4. Dickie, M. & Gerking, S., 1993. "Formation of Risk Beleifs, Joint Production and Willingness to Pay to Avoid Skin Cancer," Papers 398e, Georgia - College of Business Administration, Department of Economics.
  5. Viscusi, W Kip & Aldy, Joseph E, 2003. " The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
  6. James Hammitt & Kevin Haninger, 2010. "Valuing fatal risks to children and adults: Effects of disease, latency, and risk aversion," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 57-83, February.
  7. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
  8. repec:reg:rpubli:282 is not listed on IDEAS
  9. Krupnick, Alan, et al, 2002. " Age, Health and the Willingness to Pay for Mortality Risk Reductions: A Contingent Valuation Survey of Ontario Residents," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 161-86, March.
  10. Smith, V Kerry & Desvousges, William H, 1987. "An Empirical Analysis of the Economic Value of Risk Changes," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 89-114, February.
  11. Anna Alberini & Milan Šcasný, 2010. "Context and the VSL: Evidence from a Stated Preference Study in Italy and the Czech Republic," Working Papers 2010.66, Fondazione Eni Enrico Mattei.
  12. Dickie, Mark & Gerking, Shelby, 2007. "Altruism and environmental risks to health of parents and their children," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 323-341, May.
  13. Trudy Cameron & J. DeShazo & Peter Stiffler, 2010. "Demand for health risk reductions: A cross-national comparison between the U.S. and Canada," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 245-273, December.
  14. Bosworth, Ryan & Cameron, Trudy Ann & DeShazo, J.R., 2009. "Demand for environmental policies to improve health: Evaluating community-level policy scenarios," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 293-308, May.
  15. Richard Blundell & Pierre-Andr� Chiappori & Costas Meghir, 2005. "Collective Labor Supply with Children," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1277-1306, December.
  16. Hammitt, James K & Graham, John D, 1999. "Willingness to Pay for Health Protection: Inadequate Sensitivity to Probability?," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 33-62, April.
  17. Haddad, Lawrence James & Peña, Christine & Nishida, Chizuru & Quisumbing, Agnes R. & Slack, Alison T., 1996. "Food security and nutrition implications of intrahousehold bias," FCND discussion papers 19, International Food Policy Research Institute (IFPRI).
  18. Cameron, Trudy Ann & James, Michelle D, 1987. "Efficient Estimation Methods for "Closed-ended' Contingent Valuation Surveys," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 269-76, May.
  19. Corso, Phaedra S & Hammitt, James K & Graham, John D, 2001. " Valuing Mortality-Risk Reduction: Using Visual Aids to Improve the Validity of Contingent Valuation," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 165-84, September.
  20. Dickie, Mark & Messman, Victoria L., 2004. "Parental altruism and the value of avoiding acute illness: are kids worth more than parents?," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1146-1174, November.
  21. Blomquist, Glenn C. & Dickie, Mark & O'Conor, Richard M., 2011. "Willingness to pay for improving fatality risks and asthma symptoms: Values for children and adults of all ages," Resource and Energy Economics, Elsevier, vol. 33(2), pages 410-425, May.
  22. Behrman, Jere R & Pollak, Robert A & Taubman, Paul, 1986. "Do Parents Favor Boys?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 33-54, February.
  23. Trudy Ann Cameron, 2010. "Euthanizing the Value of a Statistical Life," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 161-178, Summer.
  24. Cameron, Trudy Ann & DeShazo, J.R., 2013. "Demand for health risk reductions," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 87-109.
  25. Jerry Hausman, 2012. "Contingent Valuation: From Dubious to Hopeless," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 43-56, Fall.
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