The Value of a Statistical Life in Transport: Findings from a New Contingent Valuation Study in Sweden

This article presents the results of a contingent valuation study from Sweden aimed at estimating the value of a statistical life (VOSL) in road traffic safety. Data on respondents' own subjective risk was collected by use of visual aids presented in a mail questionnaire. The relationship between willingness-to-pay (WTP) and absolute risk reduction was estimated by using a non-linear, least absolute deviation estimation method. This study generated an income-adjusted VOSL of SEK22.3 million (US$2.6 million). Analysis of WTP's sensitivity to probability variation indicates that in future studies, valuing risk reductions in road traffic, the magnitude of absolute risk and relative risk reductions to consider should be in perceptible range. On addition it should also be possible for respondents to compare the magnitudes of different risk reductions.     

Willingness to Pay for Health Protection: Inadequate Sensitivity to Probability?

Efficient investments in health protection require valid estimates of the public's willingness to forgo consumption for diminished probabilities of death, injury, and disease. Stated valuations of risk reduction are not valid measures of economic preference if the valuations are insensitive to probability variation. This article reviews the existing literature on CV studies of reductions in health risk and finds that most studies are poorly designed to assess the sensitivity of stated valuations to changes in risk magnitude. Replication of a recent study published in this journal by Johannesson et al. (1997) demonstrates how serious the problem of insensitivity can be, even for a study that reports plausible results. New empirical results are presented from telephone surveys designed to provide internal and external tests of how WTP responds to size of risk reduction. The effect of variations in instrument design on estimated sensitivity to magnitude is examined. Overall, estimated WTP for risk reduction is inadequately sensitive to the difference in probability, that is, the magnitude of the difference in WTP for different reductions in risk is typically smaller than suggested by standard economic theory. Additional research to improve methods for communicating changes in risk is needed, and future studies of stated WTP to reduce risk should include rigorous validity checks.     

Effects of Disease Type and Latency on the Value of Mortality Risk

We evaluate the effects of disease type and latency on willingness to pay (WTP) to reduce environmental risks of chronic, degenerative disease. Using contingent-valuation data collected from approximately 1,200 respondents in Taiwan, we find that WTP declines with latency between exposure to environmental contaminants and manifestation of any resulting disease, at a 1.5 percent annual rate for a 20 year latency period. WTP to reduce the risk of cancer is estimated to be about one-third larger than WTP to reduce risk of a similar chronic, degenerative disease. The value of risk reduction also depends on the affected organ, environmental pathway, or payment mechanism: estimated WTP to reduce the risk of lung disease due to industrial air pollution is twice as large as WTP to reduce the risk of liver disease due to contaminated drinking water.     

The value of private safety versus the value of public safety

In this study, one group of respondents is offered to purchase a safety device to be installed in their cars, while another group is offered a public safety program (improved road quality) which results in the same size risk reduction. In terms of the value of a statistical life, our results are very reasonable. However, the WTP for the private safety device ishigher than the WTP for the public safety measure. Drawing on a model developed by Jones-Lee (1991), we show that some types of altruists may, but need not, be willing to pay more for a private risk reduction than for a uniform risk reduction of the same magnitude. Still, our empirical results are surprising, and further empirical research seems warranted.     

An Experimental Investigation of the Disparity Between WTA and WTP for Lotteries

In this paper we experimentally investigate the disparity between willingness-to-accept (WTA) and willingness-to-pay (WTP) for risky lotteries. The direction of the income effect is reversed by endowing subjects with the highest price of a lottery when asking the WTP question. Our results show that the income effect is too small to be the only source of the disparity. Since the disparity concentrates on a subsample of subjects, parametric and nonparametric tests of the WTA-WTP ratio may lead to contradictory results. The disparity is significantly reduced when background risk is introduced. That is, putting subjects always into a risky position could improve the contingent valuation method, which is often concerned with the assessment of risky situations such as health risks, automobile safety, etc.      

The Benefits of Reducing Gun Violence: Evidence from Contingent-Valuation Survey Data

This article presents an estimate of the benefits of reducing crime using the contingent-valuation (CV) method. We focus on gun violence, a crime of growing policy concern in America. Our data come from a national survey in which we ask respondents referendum-type questions that elicit their willingness-to-pay (WTP) to reduce gun violence by 30%. We estimate that the public's WTP to reduce gun assaults by 30% equals $24.5 billion, or around $1.2 million per injury. Our estimate implies a statistical value of life that is quite consistent with those derived from other methods.     

Scope insensitivity in health risk reduction studies: A comparison of choice experiments and the contingent valuation method for valuing safer food

Scope insensitivity and embedding are fundamental concerns in contingent valuation studies for health risk reductions. Recently, choice experiments have increasingly been used to obtain contingent willingness to pay (WTP) estimates. We juxtapose the WTP estimates of a choice experiment (CE) to those of the contingent valuation method (CVM) for different health risk reductions and compare them in the extent of scope insensitivity and embedding. WTP using CVM is scope sensitive for single health risks, but embedding is observed for multiple disease risks. In contrast, WTP based on the CE is highly scope sensitive and convex in risk reduction levels.

Imprecise preferences and the WTP-WTA disparity

This article reports the results of a study designed to elicit willingness to pay (WTP) and willingness to accept (WTA) values for changes in the risk of nonfatal road injuries. We examine the possibility that individuals' preferences over combinations of wealth, risk, and safety are imprecise, and that this imprecision might result in the observed disparity between WTP and WTA measures of value. The results confirm that individuals' preferences for safety are significantly imprecise, but that this alone is insufficient to explain more than part of the disparity. Indeed, respondents' estimates of the minimum that they would be prepared to accept for a risk increase frequently exceed the maximum that they would be prepared to pay for an equivalent risk reduction.     

Willingness to pay for mortality risk reductions: Does latency matter?

Using results from two contingent valuation surveys conducted in Canada and the U.S., we explore the effect of a latency period on willingness to pay (WTP) for reduced mortality risk using a structural model. We find that delaying the time at which the risk reduction occurs by 10 to 30 years reduces WTP by more than 60% for respondents in both samples aged 40 to 60 years. The implicit discount rates are equal to 3.0–8.6% for Canada and 1.3–5.6% for the U.S. JEL Classification Q51 · Q58 The findings, interpretations and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the USEPA or of the World Bank, its Executive Directors or the countries they represent.     

Willingness to Pay for Risk Reduction and Risk Aversion without the Expected Utility Assumption

By means of minimal assumptions on the individual preferences, I show that the Willingness To Pay (WTP) for both a FSD and SSD reduction of risk is the sum of a mean effect, a pure risk effect and a wealth effect. As a result, the WTP of a risk-averse decision maker may be lower than the WTP of a risk-neutral one, for a large class of individual preferences’ representation and a large class of risks.     

Age, Health and the Willingness to Pay for Mortality Risk Reductions: A Contingent Valuation Survey of Ontario Residents

We present the results of a contingent valuation survey eliciting willingness to pay (WTP) for mortality risk reductions. The survey was self-administered using a computer by 930 persons in Hamilton Ontario aged 40 to 75. Visual and audio aides were used to enhance risk comprehension. Mean WTP figures for a contemporaneous risk reduction imply a value of a statistical life of approximately C$l.2 to C$3.8 million (1999 C$). Mean WTP is constant with age up to 70 years, and is about 30 percent lower for persons aged 70 and older. WTP is unaffected by physical health status, but is affected by mental health.     

The value of mortality risk reductions in Delhi,India

We interviewed commuters in Delhi, India, to estimate their willingness to pay (WTP) to reduce their risk of dying in road traffic accidents in three scenarios that mirror the circumstances under which traffic fatalities occur in Delhi. The WTP responses are internally valid: WTP increases with the size of the risk reduction, income, and exposure to road traffic risks, as measured by length of commute and whether the respondent drives a motorcycle. As a result, the value of a statistical life (VSL) varies across groups of beneficiaries. For the most highly-exposed individuals the VSL is about 150,000 Purchasing Power Parity (PPP) dollars.

Elicitation of health values from mortality risk reduction

There are concerns regarding uncertainty about the accuracy of applying available empirical willingness-to-pay (WTP) estimates for reducing accidental deaths to value changes in risks of pollution-related deaths. In this study, we develop a theoretical model on defining WTP, and its determinants, and derive WTP estimates for changes in pollution-related mortality risks with varying morbidity and timing attributes. A survey is designed and conducted with 100 subjects. Each subject was to complete five choice sets and provided a range of implicit values of statistical life (VSL). The choices are estimated using the logit procedure. And, using the results of estimated multinomial logit model, the VSL is estimated to about $6.2 million.     

Precautionary behavior and willingness to pay for a mortality risk reduction: Searching for the expected relationship

This paper examines within-sample correlation between six different precautionary behaviors and stated willingness to pay for a mortality risk reduction. The paper also shows estimates of the value of a statistical life based on seat belt and bicycle helmet use as well as based on the stated willingness to pay for a risk reduction in traffic mortality. Contrary to the theoretical expectations, no correlation is found between precautionary behavior and stated willingness to pay. One major explanation is that females and the elderly take more precaution, but state a lower WTP for a risk reduction. The estimates of VSL from the different approaches are $11.0 million, $5.0 million and $2.8 million from stated WTP, bicycle helmet use and seat belt use, respectively.

Risk Perceptions and Value of a Statistical Life for Air Pollution and Traffic Accidents: Evidence from Bangkok,Thailand

This paper presents results of two contingent valuation surveys conducted in Bangkok measuring individuals’ willingness to pay (WTP) to reduce mortality risk arising from two risk contexts: air pollution traffic accidents Results from the risk perception survey disclose that respondents view the two risks differently. WTP to reduce air pollution risk is influenced by degrees of dread, severity, controllability and personal exposure, while WTP to reduce traffic accident risk is influenced by perceived immediate occurrence. Nevertheless, the value of a statistical life (VSL) for both air pollution and traffic accidents are comparable (US$0.74 to $1.32 million and US$0.87 to $1.48 million, respectively). This indicates that the risk perception factor alone has little impact on the VSL, a finding similar to previous studies using program choice indifferences.JEL Classification: I18, D61, J17, J28     

The Effect of Environmental Disclosure Requirements on Willingness to Pay for Residential Properties in Borderlands Community*

Objective. This study examines the effect of environmental information disclosure requirements on future real estate transactions. The setting involves pollution from a concrete products and quarrying site near a largely Hispanic, residential community. Methods. The survey‐based contingent valuation (CV) method is used to test the hypothesis that a split‐sample treatment for an information disclosure requirement with a potentially negative affective quality will reduce the willingness to pay (WTP) of potential buyers for a typical property. Results. Results indicate that the information disclosure treatment reduces WTP, and that this effect is significantly exacerbated when the surveys are conducted in Spanish. Conclusions. In addition to identifying significant reductions in the WTP of potential home buyers, our findings demonstrate the importance of cultural and regional considerations for how information disclosure requirements are conducted in real estate transactions. Future CV studies should also consider Spanish‐language options in applications involving significant Hispanic populations.     

Sacrificing Civil Liberties to Reduce Terrorism Risks

Our survey results demonstrate that targeted screening of airline passengers raises conflicting concerns of efficiency and equity. Support for profiling increases if there is a substantial reduction in avoided delays to other passengers. The time cost and benefit components of targeting affect support for targeted screening in an efficiency-oriented manner. Nonwhite respondents are more reluctant than whites to support targeting or to be targeted. Terrorism risk assessments are highly diffuse, reflecting considerable risk ambiguity. People fear highly severe worst case terrorism outcomes, but their best estimates of the risk are more closely related to their lower bound estimates than their upper bound estimates. Anomalies evident in other risk perception contexts, such as hindsight biases and embeddedness effects, are particularly evident for terrorism risk beliefs.     

Valuing fatal risks to children and adults: Effects of disease,latency, and risk aversion

We examine heterogeneity of willingness to pay (WTP) to reduce risks of fatal disease and trauma to adults and children. Using a stated-preference survey fielded to a large, nationally representative internet panel, we find that WTP to reduce fatal-disease risks (caused by consuming pesticide residues on foods) are similar for several types of cancer and non-cancer diseases and similar to WTP to reduce motor-vehicle crashes. WTP to reduce risk to one’s child is uniformly larger than to reduce risk to another adult or to oneself. Estimated values per statistical life are $6–10 million for adults and $6–10 million for adults and 12–15 million for children.     

The value of improved road safety

We report the results of a contingent valuation study for finding a conservative estimate of the value-of-statistical-life in an urban road safety context in Sweden. We estimate the value of both a private-good device and a public-good safety program. The reduction of risk is communicated with a “community analogy” representation of the “Vision Zero” target of the national traffic-safety policy. According to this target, the road-traffic system should be designed so as to prevent accidents when they happen to lead to fatalities or severe injuries. We use the “certainty approach” for ex-post correction of results to remove or mitigate hypothetical bias of responses. As expected we find insensitivity of responses in the full sample to the size of the risk reduction being valued. By our approach we can compute a conservative estimate, based on answers from fully confident respondents, of the value of the largest possible safety enhancement (i.e. fulfilment of the “Vision Zero”). This lower bound estimate indicates a higher average willingness-to-pay for public safety-improving measures than currently assumed in benefit-cost assessments. We also find that the willingness to pay is considerably lower within a public-good than a private-good framework and a weak indication of sensitivity to scale among the most confident respondents. JEL Codes H43 · I18 · Q51     

A Choice Experiment Approach to the Valuation of Mortality

This paper presents an integrated framework for evaluating the reduction of several types of mortality risk using a Choice Experiment (CE) approach, a type of stated preference technique. Using this approach, we can distinguish the marginal willingness to pay (MWTP) for the amount of risk reduction from the MWTP for the opportunity of risk reduction and therefore calculate the “Quantity-based” Value of a Statistical Life. The risks in our survey include mortality risks due to accident, cancer, and heart disease. The Quantity-based VSL is calculated to be 350 million JPY (in 2002 Japanese Yen, about 2.9 million US dollars). Furthermore, we analyzed the influence of subjective risk perception and population characteristics of the respondents on their MWTP. Estimated results suggest that it is unnecessary to adjust the VSL according to the differences in the type of risk if the VSL is calculated using an adequate approach. However, adjustments for the timing of risk reduction and population characteristics are found to be significant for the execution of benefit transfer.JEL Classification: I18, D81, J17