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

Abstract: 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)
Date: 2013-03-28
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Beyond expected utility in the economics of health and longevity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:36067

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