We develop a numerical life-cycle model with choice over consumption and leisure, stochastic mortality and labor income processes, and calibrated to U.S. data – to characterize willingness to pay (WTP) for mortality risk reduction. Our theoretical framework can explain many empirical findings in this literature, including an inverted-U life-cycle WTP and an order of magnitude difference in prime-aged adults WTP. By endogenizing leisure and employing multiple income measures, we reconcile the literature's large variation in estimated income elasticities. By accounting for gender- and race-specific stochastic mortality and income processes, we explain the literature's black-white and female-male differences.
Joseph E. Aldy
Two New Reports and a Blog on Vehicle Issues
How Do Fuel Economy Standards Affect Consumer Welfare and Manufacturer Profits?
Fuel economy valuation varies substantially across consumer groups, and that this variation determines how the standards affect individual demographic groups and manufacturers.
Pass-Through and Welfare Effects of Regulations that Affect Product Attributes
We show that the relationship between pass-through and welfare changes does not hold for a regulation that affects production costs and product attributes.