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The Discount Rate and the Value of Remaining Years of Life


  • John Hartwick

    () (Queen's University)


We back out an estimate of a personal discount rate of between 3 and 4 percent for a person with a life expectancy of 74 years who dies at age 30 (or 40) and has a value of statistical life of $6.3 million. Central to these calculations is the series generated by Murphy and Topel of value of life years (the dollar value of consumption plus the dollar value of leisure, with some smoothing for income in retirement). We employ the Makeham "model" of life expectancy in our calculations.

Suggested Citation

  • John Hartwick, 2008. "The Discount Rate and the Value of Remaining Years of Life," Working Papers 1191, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1191

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    References listed on IDEAS

    1. Azfar, Omar, 1999. "Rationalizing hyperbolic discounting," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 245-252, February.
    2. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October.
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    More about this item


    Discount rate; Value of life;

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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