Valuation of Mortality Risk Reductions in Policy Analysis

Valuation of mortality risk reductions is central to the economic assessment of public health and environmental policies. It translates small changes in the probability of death into monetary terms, thereby facilitating benefit–cost analysis and guiding resource allocation. The principal metric is the value of a statistical life (VSL), derived from individuals’ willingness to pay (WTP) for marginal reductions in mortality risk. Alternative approaches include the human capital method, which estimates the present value of future earnings foregone by premature death. Empirical studies examine how VSL varies with income, age, risk context and cultural factors, while theoretical models explore the influence of risk aversion, time preferences and risk perception on WTP. Recognising heterogeneity in preferences across populations has spurred efforts to adjust VSL estimates for income elasticity, demographic characteristics and baseline risk. In global terms, the extrapolation of VSL from high-income to low- and middle-income countries demands careful calibration of income elasticities and sensitivity analyses to capture uncertainty. Beyond national applications, valuation metrics inform international frameworks for climate policy, occupational safety and road-traffic interventions. Recent methodological advances integrate life-cycle models with stated and revealed preference data, yielding refined estimates of the value of a statistical life year (VSLY) and highlighting age-specific and temporal dimensions of mortality risk valuation. This synthesis outlines foundational concepts, emerging empirical findings and methodological challenges in valuing mortality risk reductions for policy analysis.

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Technical terms

Value of Statistical Life (VSL): A monetary measure of the trade-off individuals make between money and small changes in mortality risk.

Willingness to Pay (WTP): The maximum amount an individual is prepared to pay to secure a marginal reduction in the probability of death.

Human Capital Method: An approach that values life by estimating the present value of future earnings lost due to premature mortality.

Income Elasticity of VSL: The rate at which the value of statistical life changes in response to variations in income levels.

References

1. Life Value Assessment Methods in Emerging Markets: Evidence from China. Sustainability (2023).
2. Valuing life over the life cycle. Journal of Health Economics (2023).
3. Income Elasticities and Global Values of a Statistical Life. Journal of Benefit-Cost Analysis (2017).
4. Valuing Mortality Risk Reductions in Global Benefit-Cost Analysis. Journal of Benefit-Cost Analysis (2019).