Estimating the value of life expectancy gains in Tanzania using the life satisfaction and model based approaches

Abstract

Policymakers in low and lower‐middle income countries often face difficult trade‐offs between saving lives and livelihoods, as exemplified by the COVID‐19 pandemic. Yet, evidence regarding the preferences of the population is often lacking in such settings. In this paper, I estimate the value of an additional year of life expectancy in Tanzania using information on subjective well‐being and population mortality. More specifically, I combine age‐sex specific subnational estimates of remaining life expectancy with data from a representative household survey, which includes information on consumption expenditures and life satisfaction. This information is then carried forward into a life satisfaction regression to estimate the trade‐off between consumption and an additional year of life expectancy. The results imply that a representative individual from the sample would be willing to trade off around 9% of their annual consumption expenditure to obtain an additional year of remaining life expectancy. The estimated values are close to those derived from calibrated models based on different elicitation methods, such as revealed preferences. This suggests that life satisfaction measures could be useful in deriving estimates of the value of longevity changes in environments where traditional methods, such as estimating compensating wage differentials, are difficult to apply.