Rate of time preference and the quantity adjusted value of life in India

K.R. Shanmugam

Environment and Development Economics, 2006, vol. 11, issue 5, 569-583

Abstract: The choice of appropriate discount rate for comparing the long-term health benefits of policies is a complex issue. This study contributes to this sparsely researched issue from the perspective of developing countries by estimating the implicit discount rate that workers reveal through their willingness to incur death risks on-the-job and quantity-adjusted value of life of workers using an original data set from the Indian labor market. The estimated real discount rate ranges from 7.6 to 9.7 per cent, which is closer to the financial market rate for the study period and consistent with earlier studies from developed nations. The estimated value of life ranges are Rs. 24.3–26.5 (US $1.34–1.47) million. The results of the study can aid policy makers, international agencies, and researchers in evaluating health projects in India and other developing nations.

Date: 2006
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