Journal of Risk and Uncertainty

, Volume 23, Issue 3, pp 261–279 | Cite as

Background Risks and the Value of a Statistical Life

  • Louis R. Eeckhoudt
  • James K. Hammitt


We examine the effects of background mortality and financial risks on an individual's willingness to pay to reduce his mortality risk (the value of statistical life or VSL). Under reasonable assumptions about risk aversion and prudence with respect to wealth in the event of survival and with respect to bequests in the event of death, background mortality and financial risks decrease VSL. The effects of large mortality or financial risks on VSL can be substantial, but the effects of small background risks are negligible. These results suggest that the commonplace failure to account for background risk in evaluating VSL is unlikely to produce substantial bias in most applications.

value of statistical life mortality risk financial risk risk aversion prudence 


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Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  • Louis R. Eeckhoudt
    • 1
  • James K. Hammitt
    • 2
  1. 1.Catholic Faculties of Mons (Belgium) and Lille (France)MonsBelgium
  2. 2.Center for Risk AnalysisHarvard School of Public HealthBostonUSA

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