Valuing mortality risk in China: Comparing stated-preference estimates from 2005 and 2016

Abstract

We estimate the marginal rate of substitution of income for reduction in current annual mortality risk (the "value per statistical life" or VSL) using statedpreference surveys administered to independent samples of the general population of Chengdu China in 2005 and 2016. We evaluate the quality of estimates by the theoretical criteria that WTP for risk reduction should be strictly positive and nearly proportional to the magnitude of the risk reduction (evaluated by comparing answers between respondents) and test the effect of excluding respondents whose answers violate these criteria. For subsamples of respondents that satisfy the criteria, point estimates of the sensitivity of WTP to risk reduction are consistent with theory and yield estimates of VSL that are two to three times larger than estimated using the full samples. Between 2005 and 2016, estimated VSL increased sharply, from about 22,000 USD in 2005 to 550,000 USD in 2016. Income also increased substantially over this period. Attributing the change in VSL solely to the change in income implies an income elasticity of about 2.5. Our results suggest that estimates of VSL from stated-preference studies in which WTP is not close to proportionate to the stated risk reduction may be biased downward by a factor of two or more, and that VSL is likely to grow rapidly in a population with strong economic growth, which implies that environmental-health, safety, and other policies should become increasingly protective.

Valuing mortality risk in the time of COVID-19

“…Costa and Kahn ( 2004 ) estimated VSL using hedonic-wage regressions for U.S. workers each decade from 1940 to 1980; comparing estimated VSL with per capita GNP implies an income elasticity of 1.5 to 2.0. Hammitt et al ( 2019 ) conducted stated-preference studies using similar methods in Chengdu, China in 2005 and 2016; comparing estimated VSL with income growth over the period implies an elasticity of 3.0.…”

Premature Deaths, Statistical Lives, and Years of Life Lost: Identification, Quantification, and Valuation of Mortality Risks

“…Although estimates of VSL are used to calculate the monetary value to a population of a change in mortality risk, 31 The approximation is exact for an infinitesimal risk reduction and its accuracy decreases as the magnitude of the risk reduction increases. Alolayan, Evans, and Hammitt (2017) and Hammitt, Geng, Guo, and Nielsen (2019) provide bounds on the approximation error that are described below. 32 The similar term "value of a statistical life" is perhaps more common.…”

“…The magnitude of the difference between the economic value and the approximation vr can be evaluated using Equation (14) supplemented by empirical estimates of the sensitivity of VSL to wealth (Alolayan, Evans, & Hammitt, 2017;Hammitt, Geng, Guo, & Nielsen, 2019). The compensating surplus c for a reduction in hazard r equals the product of r and a VSL that is between the initial VSL (at wealth w and hazard h) and the smaller VSL at hazard h -r and wealth w -c (illustrated in Figure 3).…”

“…The effect of the reduction in wealth after paying c, holding risk constant, depends on the magnitude of c relative to wealth and on the sensitivity of VSL to wealth, generally measured by the wealth or income elasticity. Theory provides little guidance about the magnitude of the income elasticity; most empirical estimates are on the order of one, with some estimates as high as two or three (Hammitt & Robinson, 2011;Hammitt et al, 2019;Masterman & Viscusi, 2018;Viscusi & Masterman, 2017). For the United States, typical estimates of VSL are roughly $9 million and annual household income averages roughly $60,000 (Robinson & Hammitt, 2016).…”

Risk guideposts for a safer society: Introduction and overview

“…The article by Hammitt et al (2019) utilizes a stated-preference approach to ascertain the VSL in Chengdu, a large city in China. What is particularly distinctive about this study is that the authors undertook a stated-preference study in 2016 that closely followed their previous study in 2005.…”