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Willingness to Pay for Environmental Health Risk Reductions When There are Varying Degrees of Life Expectancy: A White Paper (2006)

Paper Number: EE-0495

Document Date: 09/01/2006

Author(s): U.S. Environmental Protection Agency, National Center for Environmental Economics:

Dockins, Chris, Maguire, Kelly, Simon, Nathalie

Subject Area(s):

Benefits Analysis, Valuation, Mortality Risks

Keywords:  Value of Statistical Life, Benefits Analysis,  Mortality Risk Reduction, Stated Preference Methods, Revealed Preference Methods

Abstract: 

U.S. EPA is in the process of updating its Guidelines for Preparing Economic Analyses and as such is revisiting our guidance on valuing mortality risk reductions for environmental policy. There are many aspects to these revisions, including the use of meta-analysis in summarizing mortality risk valuation estimates, that we anticipate addressing with external advisors including the Science Advisory Board – Environmental Economics Advisory Committee (SAB-EEAC). One issue in valuing mortality risk reductions is the relationship between valuation and remaining life expectancy. Given that policies extend life expectancy rather than save lives, per se, our fundamental question is: what is the most appropriate methodology to use when valuing changes in life expectancy of varying lengths? Of particular concern is how the use of existing value of statistical life (VSL) estimates in benefit-cost analysis relates to relatively short changes in life expectancy.  

The authors' strategy for addressing this question is to briefly survey the existing economics literature in this white paper. The paper is not intended to be a comprehensive literature review, but rather highlights key recent findings in order to inform the SAB-EEAC consultation. After providing some additional motivation for raising this question, we provide some background on contexts where this issue is confronted in environmental policy. We then review and summarize economic findings on the role of baseline risk, age, and health status as they relate to the question of appropriate economic values for benefit-cost analysis.

This paper is part of the  Environmental Economics Research Inventory.

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