Public- and private-good values of statistical lives: Results from a combined choice-experiment and contingent-valuation survey
2002/2: Strand, J., Department of Economics, Frisch Centre & HERO. (PDF 397 kb)
The author in this report examines how a group of 1000 randomly chosen respondents in Norway, in 1995, values statistical lives by considering their willingness to pay for hypothetical projects which presumed to save lives. The value of statistical life (VSL) is essential in many contexts involving public decision making, e.g. with regard to priorities in the health sector and determination of environmental and safety standards, and with enormous potential economic implications. Rational public policy requires awareness of the ratio of benefits to costs of carrying out mortality-reducing projects, which in turn requires knowledge of the magnitude of VSL.
Strand derive VSL both as a public and private good. The survey was carried out as a choice experiment where respondents were faced with different projects implying different required willingness to pay (WTP) for reducing specific risks due to three different death causes, heart disease, environmentally related illnesses and traffic accidents. The valuation procedure was in three parts: 1) pairwise comparisons (conjoint analysis), 2) combined contingent-ranking and contingent-valuation of willingness to pay (WTP) for public projects to reduce overall population mortality risk, and 3) WTP for individual treatment reducing own mortality risk from heart disease.
Parts 1-2 comprise all three death causes, and indicate public-good VSL in the range 3-6 million USD, with heart disease deaths in the lower part of this range, environmental causes in the upper part, and traffic accidents in-between. Part 2 also permits a splitting up of VSL into motives (self-motivated and altruistic), and indicates that about 30 % of total public-good WTP is self-motivated. Part 3 provides a self-motivated (private-good) VSL figure for heart disease in the range 1-1.5 million USD, close to the self-motivated share of VSL from part 2. We find high consistency between values derived, and indications that private- and public-good VSL may differ substantially, as well as VSL by death cause. Under pairwise comparisons in part 1 we find complete insensitivity of VSL to risk magnitude (or "scope"), in contrast to existing literature. The more complex choices under part 2 by contrast imply considerable scope sensitivity.