The Value of a Statistical Life and the Coefficient of Relative Risk Aversion

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The Value of a Statistical Life and the Coefficient of Relative Risk Aversion

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Title: The Value of a Statistical Life and the Coefficient of Relative Risk Aversion
Author: Kaplow, Louis
Citation: Louis Kaplow, The Value of a Statistical Life and the Coefficient of Relative Risk Aversion, 31 J. Risk & Uncertainty 23 (2005).
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Abstract: Individuals’ risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals’ coefficients of relative risk aversion (R’s) in excess of one, and often significantly higher. However, it can be shown that high R’s imply equally high values for the income elasticity of the value of a statistical life. Yet estimates of this elasticity, derived from labor and product markets, are in the range of 0.5 to 0.6. Furthermore, it turns out that even an R below one is difficult to reconcile with these elasticity estimates. Thus, there appears to be an important (additional) anomaly involving individuals’ risk-taking behavior in different market settings.
Published Version: http://download.springer.com/static/pdf/103/art%253A10.1007%252Fs11166-005-2928-1.pdf?auth66=1380808296_bdc617d151670cf1b19225cf19532f81&ext=.pdf
Other Sources: http://www.nber.org/papers/w9852
http://lsr.nellco.org/cgi/viewcontent.cgi?article=1214&context=harvard_olin
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:12063393
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