Risk Aversion and the Value of Risk to Life

Bommier, Antoine and Villeneuve, Bertrand (2008): Risk Aversion and the Value of Risk to Life.

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Value of Statistical Life; Lifecycle Behavior; Cost-benefit Analysis
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; J - Labor and Demographic Economics > J1 - Demographic Economics > J17 - Value of Life ; Forgone Income; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis

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