On the Value of Changes in Life Expectancy: Blips versus Parametric Changes

Magnus Johannesson, Per-Olov Johansson () and Karl-Gustaf Löfgren
Additional contact information
Per-Olov Johansson: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden
Karl-Gustaf Löfgren: Dept. of Economics, University of Umeå

No 152, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: Previous studies indicate that the general public would prefer to reallocate medical resources from old people to young ones, and also has a low WTP for measures that increase the survival probability at an advanced age. In this paper, we present an analysis of the value of a ‘blip’, i.e. an immediate small reduction, in the hazard rate for a random sample of Swedes. Since the risk reduction is age-independent (2 ‘extra saved lives’ out of 10,000 during the next year), we can examine how the WTP and the implied value of a statistical life vary with age. We also show how blip data can be used to obtain a lower bound for the value of a parametric, i.e. permanent, change in an individual’s hazard rate. This approach avoids asking respondents to perform the tricky task of estimating, for example, their entire future survival and income paths, a task which is necessary in order to estimate the WTP for a change lasting over their remaining life cycle. The estimated willingness to pay as well as the implied value of a statistical life are very reasonable, The value of life exhibits an inverted-U shape with respect to age, peaking at the age of 40, and falls in the $3 to $7 million interval where most reasonable estimates are clustered according to Viscusi’s (1992) survey.

Keywords: Willingness to pay; insurance; life expectancy; statistical life; ageing (search for similar items in EconPapers)
JEL-codes: D10 H43 I10 I31 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1997-01
References: Add references at CitEc
Citations: View citations in EconPapers (65)

Published in Journal of Risk and Uncertainty, 1997, pages 221-240.

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: On the Value of Changes in Life Expectancy: Blips versus Parametric Changes (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0152

Access Statistics for this paper

More papers in SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Helena Lundin ().