Beyond Expected Utility in the Economics of Health and Longevity
Juan Cordoba and
Marla Ripoll ()
Staff General Research Papers Archive from Iowa State University, Department of Economics
We document various limitations of the expected utility model for the study of health and longevity. The model assumes individuals are indifferent between early and late resolution of uncertainty. This assumption gives rise to predictions regarding the economic value of life that are inconsistent with relevant evidence. For example, poor individuals would price life below the present value of foregone income or even negatively. We show that a non-expected utility model disentangling intertemporal substitution from risk aversion can overcome these limitations. We illustrate the quantitative implications of our model for the economic value of life across countries and time.
Keywords: life expectancy; value of statistical life; mortality risk aversion; Epstein-Zin-Weil pref- erences; Welfare; AIDS. (search for similar items in EconPapers)
JEL-codes: I J (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:36067
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