The Willingness to Accept Value of Statistical Life Relative to the Willingness to Pay Value: Evidence and Policy Implications

Guria, Jagadish C.; Leung, Joanne; Jones‐Lee, Michael; Loomes, Graham

doi:10.1007/s10640-005-6030-6

Cited by 55 publications

(29 citation statements)

References 12 publications

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“…WTAC for risk increases is expected to be higher than WTP for a similar risk reduction, because people do not have to consider their budget constraint and the potential presence of an endowment effect under WTAC (e.g. Guria et al 2005). Since WTAC questions are concerned with increases in risk, absolute changes in risk levels are used in the analysis.…”

Section: Methodological Characteristicsmentioning

confidence: 99%

The Effect of Risk Context on the Value of a Statistical Life: a Bayesian Meta-model

Dekker

Brouwer

Hofkes

et al. 2011

Environ Resource Econ

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This paper presents the first value of statistical life (VSL) meta-analysis that empirically estimates correction factors for 'out of context' benefits transfer (BT) purposes. In the field of mortality risk reductions elicited willingness to pay values in one risk context, say road safety, are frequently applied in other risk contexts like air pollution. However, differences in risk perception and the population at risk across contexts are likely to result in diverging VSL estimates. In a meta-analysis of 26 international stated preference studies, a Bayesian model is estimated regressing contingent values for mortality risk reductions, originating from three different risk contexts, on the characteristics of the risk reduction itself and additional variables characterizing the underlying studies. A willingness to pay (WTP) premium for mortality risk reductions in the air pollution and general mortality risk context relative to improving road safety is observed. Evaluated at the mean, road safety VSL estimates should be multiplied by a factor 1.8 before being applicable in the air pollution context. Moreover, in an illustrative BT exercise we find limited overlap in the set of context specific predictive VSL distributions. Consequently, 'out of context' BT results in a substantial overor underestimation of the VSL.

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Section: Methodological Characteristicsmentioning

confidence: 99%

The Effect of Risk Context on the Value of a Statistical Life: a Bayesian Meta-model

Dekker

Brouwer

Hofkes

et al. 2011

Environ Resource Econ

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“…Theoretically, the values of WTP and WTA should not differ greatly [51], however, in practice, large divergences between WTP and WTA can be observed due to factors such as substitutability, income effect and transaction costs) [20,50,52,53]. In most cases, WTP estimates are used, as they are more conservative [3,49].…”

Section: Choice Of Willingness To Acceptmentioning

confidence: 99%

“…In most cases, WTP estimates are used, as they are more conservative [3,49]. Nonetheless, a number of empirical studies in a variety of circumstances have found that WTA is more reliable, especially for environment or ecosystem management [52,53]. In particular, an ecosystem or landscape restoration programs are designed to restore degrading ecosystems to prior healthy levels and thereby address perceived welfare losses.…”

Section: Choice Of Willingness To Acceptmentioning

confidence: 99%

Estimation of Rural Households’ Willingness to Accept Two PES Programs and Their Service Valuation in the Miyun Reservoir Catchment, China

Yang

Zhang

et al. 2018

Sustainability

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Abstract:As the only surface water source for Beijing, the Miyun Reservoir and its catchment (MRC) are a focus for concern about the degradation of ecosystem services (ES) unless appropriate payments for ecosystem services (PES) are in place. This study used the contingent valuation method (CVM) to estimate the costs of two new PES programs, for agriculture and forestry, and to further calculate the economic value of ES in the MRC from the perspective of local rural households' willingness to accept (WTA). The results of Logit model including WTA and the variables of household and village indicate that the local socio-economic context has complex effects on the WTA of rural households. In particular, the bid amount, location and proportion of off-farm employment would have significant positive effects on the local WTA. In contrast, the insignificance of the PES participation variable suggests that previous PES program experiences may negatively impact subsequent program participation. The mean WTA payments for agriculture and forestry PES programs were estimated as 8531 and 8187 yuan/ha/year, respectively. These results consistently explain the differentiated opportunity costs on both farmland and forestry land. Meanwhile, the differentiated WTA values in Beijing vs. the surrounding Hebei Province follow the interest differences and development gaps between jurisdictions. Finally, the total economic value of ES in the MRC area was estimated at 11.1 billion yuan/year). The rational economic value of ES for the restoration priority areas reaches 515.2 million yuan/year. For the existing budget gap (299 million yuan/year), the study proposed that decision makers increase the water tariff by 0.08 yuan to raise the funds needed. The study also concluded that these results are not only financially and politically feasible but also cost-effective. This study has policy implications for improving the implementation efficiency and providing quantified supports for PES programs in megacity source water area.

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“…6 There are other studies reporting WTP-WTA disparity in the context of health and value of life. Examples include hearing aid provision (Grutters et al 2008), new medicine (O'Brien et al 1998), health risk from drinking water (Viscusi and Huber, 2012) and transport safety (Guria et al 2005). 6 values are higher than the true value, resulting in a WTP-WTA divergence that increases in uncertainties about the true value of the good being traded.…”

Section: Discrete Quantity Changes and Substitution Effectsmentioning

confidence: 99%

Understanding Behavioral Explanations of the WTP-WTA Divergence Through a Neoclassical Lens: Implications for Environmental Policy

Kim¹,

Kling

Zhao³

2015

Annu. Rev. Resour. Econ.

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The often observed empirical divergence between WTA and WTP measures of welfare change continues to be a topic of interest to both theoretical and applied economists. The divergence has particularly important implications for environmental policy. In this paper, we review behavioral and other explanations of the disparity with a focus on their connections to neoclassical welfare theory, and evaluate the empirical evidence of these explanations through the same lens. Some explanations of the disparity are consistent with neoclassical models and some are not. Likewise, some imply that the divergences are attributed to underlying preferences (neoclassical or not) while others suggest the divergences are due to elicitation methods, cognitive limitations, or other non-preference related reasons. We argue that the source of the divergence can inform the choice of which measure, WTP or WTA, to use in a given empirical application.

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The Willingness to Accept Value of Statistical Life Relative to the Willingness to Pay Value: Evidence and Policy Implications

Cited by 55 publications

References 12 publications

The Effect of Risk Context on the Value of a Statistical Life: a Bayesian Meta-model

The Effect of Risk Context on the Value of a Statistical Life: a Bayesian Meta-model

Estimation of Rural Households’ Willingness to Accept Two PES Programs and Their Service Valuation in the Miyun Reservoir Catchment, China

Understanding Behavioral Explanations of the WTP-WTA Divergence Through a Neoclassical Lens: Implications for Environmental Policy

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