Age effects in monetary valuation of reduced mortality risks: the relevance of age-specific hazard rates

This paper highlights the relevance of age-specific hazard rates in explaining the age variation in “value of statistical life” (VSL) figures. The analysis—which refers to a stated preference framework—contributes to the ongoing discussion of whether benefits resulting from reduced mortality risk should be valued differently depending on the age of the beneficiaries. By focussing on a life-threatening environmental phenomenon I show that the consideration of the individual’s age-specific hazard rate is important. If a particular risk affects all individuals regardless of their age so that their hazard rate is age-independent, VSL is rather constant for people at different age; if hazard rate varies with age, VSL estimates are sensitive to age. The results provide an explanation for the mixed outcomes in empirical studies and illustrate in which cases an adjustment to age may or may not be justified. Efficient provision of live-saving measures requires that such differences to be taken into account.