Fatality Risk Regulation

James K. Hammitt and Nicolas Treich

No 21-1177, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Environmental, transportation, occupational, and other regulations that reduce fatality risk are frequently evaluated using benefit-cost analysis (BCA). We examine how risk reductions are valued under BCA, utilitarian and prioritarian SWFs. The social value of risk reduction (SVRR) to an individual is the rate of increase of social welfare for a small decrease to the individual’s current-period fatality risk. Under BCA, the SVRR is the individual’s value per statistical life (VSL), which is increasing in wealth and baseline risk. Under utilitarian and prioritarian SWFs, the SVRR is far less sensitive to income; it can decrease with income for prioritarian SWFs that exhibit sufficient inequality aversion. The SVRR increases with or is independent of baseline risk. Like VSL, it can increase or decrease with age, but prioritarian SWFs assign larger SVRR to younger relative to older individuals than does the utilitarian SWF. Extensions to catastrophe aversion and nonfatal health risks are discussed.

Keywords: mortality; regulation; benefit-cost analysis; value of a statistical life; fair innings; age; income; catastrophe aversion; prioritarian; utilitarian (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-age, nep-env, nep-hea and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:125139

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