The Income Elasticity of the Value per Statistical Life: Transferring Estimates between High and Low Income Populations

Journal of Benefit-Cost Analysis 01/2011; 2(1):1-1. DOI: 10.2202/2152-2812.1009
Source: RePEc

ABSTRACT The income elasticity of the value per statistical life (VSL) is an important parameter for policy analysis. Mortality risk reductions often dominate the quantified benefits of environmental and other policies, and estimates of their value are frequently transferred across countries with significantly different income levels. U.S. regulatory agencies typically assume that a 1.0 percent change in real income over time will lead to a 0.4 to 0.6 percent change in the VSL. While elasticities within this range are supported by substantial research, they appear nonsensical if applied to populations with significantly smaller incomes. When transferring values between high and lower income countries, analysts often instead assume an elasticity of 1.0, but the resulting VSL estimates appear large in comparison to income. Elasticities greater than 1.0 are supported by research on the relationship between long-term economic growth and the VSL, by cross-country comparisons, and by new research that estimates the VSL by income quantile. Caution is needed when applying these higher elasticities, however, because the resulting VSLs appear smaller than expected future earnings or consumption in some cases, contrary to theory. In addition to indicating the need for more research, this comparison suggests that, in the interim, VSL estimates should be bounded below by estimates of future income or consumption.

1 Bookmark
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Predicting the human-health effects of reducing atmospheric emissions of nitrogen oxide (NOx ) emissions from power plants, motor vehicles, and other sources is complex because of nonlinearity in the relevant atmospheric processes. We estimate the health impacts of changes in fine particulate matter (PM2.5 ) and ozone concentrations that result from control of NOx emissions alone and in conjunction with other pollutants in and outside the mega-city of Shanghai, China. The Community Multiscale Air Quality (CMAQ) Modeling System is applied to model the effects on atmospheric concentrations of emissions from different economic sectors and geographic locations. Health impacts are quantified by combining concentration-response functions from the epidemiological literature with pollutant concentration and population distributions. We find that the health benefits per ton of emission reduction are more sensitive to the location (i.e., inside vs. outside of Shanghai) than to the sectors that are controlled. For eastern China, we predict between 1 and 20 fewer premature deaths per year per 1,000 tons of NOx emission reductions, valued at $300-$6,000 per ton. Health benefits are sensitive to seasonal variation in emission controls. Policies to control NOx emissions need to consider emission location, season, and simultaneous control of other pollutants to avoid unintended consequences.
    Risk Analysis 09/2013; · 2.28 Impact Factor
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Purpose The objective of this paper is to investigate the impact of the road environment (urban vs. rural) in the willingness-to-pay to reduce traffic risk. Methods The process is based on state-of-the-art econometric models (ordered probit and random effects ordered probit models), using data from a stated preference survey, with separate scenarios for urban and rural roads. The theoretical constructs of “willingness to pay to reduce a fatality” (WTPF) and “value of (statistical) life” (VOSL) are used. Results The WTPF for the rural area is found 3.6 times higher than for the urban environment. This finding is consistent with the literature and can be interpreted as a higher perception of traffic risk associated with rural trips over urban trips. When the WTPF is weighted by the traffic volume, this difference is reduced to 1.85 times higher VoSL for rural over urban trips. Conclusions The estimated values of statistical life seem somewhat high compared to other estimates around the world. However, they are consistent with similar studies in Greece. The VOT for the two cases is similar and has a reasonable magnitude, suggesting that the WTPF/VOSL differences are not due to a major discrepancy in valuation of rural vs. urban trips.
    European Transport Research Review
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Exposure to fine particles ≤2.5 μm in aerodynamic diameter (PM2.5) from incomplete combustion of solid fuels in household stoves is recognized as a major contributor to global ill health. Still there are few attempts to estimate the economic costs and health benefits of interventions to reduce exposure. The objective of this paper is to estimate costs and health benefits to women of possible interventions to replace current biomass stoves in Guizhou Province, southwest China, with cleaner burning stoves. Prevalence of chronic obstructive pulmonary disease (COPD) was measured in women ≥30 y living in households using biomass as fuel. In a sub-sample of households indoor PM2.5 concentrationswere measured. Reduced exposure from replacing stoves in individual homes and at the community level was estimated using information about stoves, concentration levels, and time-activity patterns. Annual avoided new cases of COPD were estimated. The economic value of avoided cases was compared to intervention costs. Probabilistic cost-benefit analysis was performed using Monte-Carlo simulation and the impact of uncertainty in single parameters was explored. The mean reduction in annual average PM2.5 exposure is estimated at 127–294 μg/m3, which corresponds to a 41–77% reduction. Annually 0.6–3.2 new cases of COPD among women may be avoided per 1000 households. The present value net benefit is 1766–22,500 Yuan (Yuan/USD ≈ 0.16) per household and mean benefit/cost-ratios (B/C) are 3.3–14.7. We conclude that policy interventions to increase access to cleaner burning stoves may bring large net benefits to rural women and their families, and to society.
    Energy for Sustainable Development 01/2013; 17(5):489-496. · 2.22 Impact Factor

Full-text (2 Sources)

Available from
May 27, 2014