Discussion Paper

Age, Health, and the Willingness to Pay for Mortality Risk Reductions: A Contingent Valuation Survey of Ontario Residents

Sep 1, 2000 | Alan J. Krupnick, Anna Alberini, Maureen L. Cropper, Nathalie B. Simon, Bernie O'Brien, Ron Goeree, Martin Heintzelman

Abstract

<p>Much of the justification for environmental rulemaking rests on estimates of the benefits to society of reduced mortality rates. This research aims to fill gaps in the literature that estimates the value of a statistical life (VSL) by designing and implementing a contingent valuation study for persons 40 to 75 years of age, and eliciting WTP for reductions in current and future risks of death. Targeting this age range also allows us to examine the impact of age on WTP and, by asking respondents to complete a detailed health questionnaire, to examine the impact of health status on WTP.</p> <p>This survey was self-administered by computer to 930 persons in Hamilton, Ontario, in 1999. The survey uses audio and visual aids to communicate baseline risks of death and risk changes and are tested for comprehension of probabilities before being asked WTP questions. We credit these efforts at risk communication with the fact that mean WTP of respondents faced with larger risk reductions exceeds mean WTP of respondents faced with smaller risk reductions; that is, our respondents pass the external scope test.</p><p>Our mean WTP estimates for a contemporaneous risk reduction imply a VSL ranging approximately from $1.2 to $3.8 million (1999 C$), depending on the size of the risk change valued, which is at or below estimates commonly used in environmental cost-benefit analyses by the Canadian and the U.S. governments. Interestingly, we find that age has no effect on WTP until roughly age 70 and above (the VSL is about $0.6 million for this age group) and that physical health status, with the possible exception of having cancer, has no effect. We also find that being mentally healthy raises WTP substantially. In addition, compared with estimates of WTP for contemporaneous risk reductions, mean WTP estimates for risk reductions of the same magnitude but beginning at age 70 are more than 50% smaller.</p>