Journal of Risk and Uncertainty

, Volume 35, Issue 1, pp 45–66

Statistical vs. identified lives in benefit-cost analysis

Article

DOI: 10.1007/s11166-007-9015-8

Cite this article as:
Hammitt, J.K. & Treich, N. J Risk Uncertainty (2007) 35: 45. doi:10.1007/s11166-007-9015-8

Abstract

Evaluation of projects that affect mortality risk usually assumes that risk changes are small and similar across individuals. In reality, risks differ among individuals and information about risk heterogeneity determines the extent to which affected lives are “statistical” or “identified” and influences the outcome of benefit-cost analysis (BCA). The effects of information about risk heterogeneity on BCA depend on, inter alia, whether information concerns heterogeneity of baseline or change in risk and whether valuation uses compensating or equivalent variation. BCA does not systematically favor identified over statistical lives. We suggest some political factors that may explain the apparent public bias.

Keywords

Benefit-cost analysis Value of statistical life Information Heterogeneity 

JEL Classification

D61 D81 H42 I18 

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Center for Risk AnalysisHarvard UniversityBostonUSA
  2. 2.Toulouse School of Economics (LERNA-INRA)ToulouseFrance

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