IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/31411.html
   My bibliography  Save this paper

Valuing Non-fatal Health Risks: Monetary and Health-Utility Measures

Author

Listed:
  • Hammitt, James K.

Abstract

Metrics for valuing environmental, health, and safety policies should be consistent with both the preferences of affected individuals and social preferences for distribution of health risks in the population. Two classes of metrics are widely used: monetary measures (e.g., willingness to pay) and health-utility measures (e.g., quality-adjusted life years (QALYs), disability-adjusted life years (DALYs)), both of which are summed across the population. Health-utility measures impose more structure than monetary measures, with the result that individuals’ preferences often appear inconsistent with these measures; for the same reason, health-utility measures help protect against cognitive errors and other sources of incoherence in valuation. This paper presents theoretical and empirical evidence comparing these metrics and examining how they co-vary.

Suggested Citation

  • Hammitt, James K., 2017. "Valuing Non-fatal Health Risks: Monetary and Health-Utility Measures," TSE Working Papers 17-757, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:31411
    as

    Download full text from publisher

    File URL: http://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2017/wp_tse_757.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Aldy & W. Kip Viscusi, 2008. "Adjusting the Value of a Statistical Life for Age and Cohort Effects," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 573-581, August.
    2. Joseph E. Aldy & W. Kip Viscusi, 2007. "Age Differences in the Value of Statistical Life: Revealed Preference Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 241-260, Summer.
    3. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2008. "How are preferences revealed?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1787-1794, August.
    4. Lisa A. Robinson & James K. Hammitt, 2016. "Valuing Reductions in Fatal Illness Risks: Implications of Recent Research," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 1039-1052, August.
    5. Adler, Matthew D. & Hammitt, James K. & Treich, Nicolas, 2014. "The social value of mortality risk reduction: VSL versus the social welfare function approach," Journal of Health Economics, Elsevier, vol. 35(C), pages 82-93.
    6. Josephine A. Mauskopf & Michael T. French, 1991. "Estimating the Value of Avoiding Morbidity and Mortality from Foodborne Illnesses," Risk Analysis, John Wiley & Sons, vol. 11(4), pages 619-631, December.
    7. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2013. "What Good Is Wealth Without Health? The Effect Of Health On The Marginal Utility Of Consumption," Journal of the European Economic Association, European Economic Association, vol. 11, pages 221-258, January.
    8. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    9. Jytte Nielsen & Susan Chilton & Michael Jones-Lee & Hugh Metcalf, 2010. "How would you like your gain in life expectancy to be provided? An experimental approach," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 195-218, December.
    10. Bleichrodt, Han & Wakker, Peter & Johannesson, Magnus, 1997. "Characterizing QALYs by Risk Neutrality," Journal of Risk and Uncertainty, Springer, vol. 15(2), pages 107-114, November.
    11. An, Mark Y. & Roberto Ayala, 1995. "A Mixture Model of Willingness to Pay Distributions," Working Papers 95-21, Duke University, Department of Economics.
    12. Paul Dolan & Daniel Kahneman, 2008. "Interpretations Of Utility And Their Implications For The Valuation Of Health," Economic Journal, Royal Economic Society, vol. 118(525), pages 215-234, January.
    13. Hammitt, James & Haninger, Kevin, 2011. "Valuing Morbidity Risk: Willingness to Pay per Quality-Adjusted Life Year," LERNA Working Papers 11.09.343, LERNA, University of Toulouse.
    14. Joseph S. Pliskin & Donald S. Shepard & Milton C. Weinstein, 1980. "Utility Functions for Life Years and Health Status," Operations Research, INFORMS, vol. 28(1), pages 206-224, February.
    15. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    16. Domeij David & Johannesson Magnus, 2006. "Consumption and Health," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-30, May.
    17. Lillard, Lee A & Weiss, Yoram, 1997. "Uncertain Health and Survival: Effects on End-of-Life Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 254-268, April.
    18. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-647, June.
    19. An, Mark Yuying, 1996. "Semiparametric Estimation of Willingness to Pay Distributions," Working Papers 96-20, Duke University, Department of Economics.
    20. Sloan, Frank A. & Kip Viscusi, W. & Chesson, Harrell W. & Conover, Christopher J. & Whetten-Goldstein, Kathryn, 1998. "Alternative approaches to valuing intangible health losses: the evidence for multiple sclerosis1," Journal of Health Economics, Elsevier, vol. 17(4), pages 475-497, August.
    21. Cameron, Trudy Ann & DeShazo, J.R., 2013. "Demand for health risk reductions," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 87-109.
    22. Aki Tsuchiya & Paul Dolan, 2005. "The QALY Model and Individual Preferences for Health States and Health Profiles over Time: A Systematic Review of the Literature," Medical Decision Making, , vol. 25(4), pages 460-467, July.
    23. Richard A. Hirth & Michael E. Chernew & Edward Miller & A. Mark Fendrick & William G. Weissert, 2000. "Willingness to Pay for a Quality-adjusted Life Year," Medical Decision Making, , vol. 20(3), pages 332-342, July.
    24. Bleichrodt, Han & Filko, Martin, 2008. "New tests of QALYs when health varies over time," Journal of Health Economics, Elsevier, vol. 27(5), pages 1237-1249, September.
    25. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2008. "How are preferences revealed?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1787-1794, August.
    26. Doctor, Jason N. & Bleichrodt, Han & Miyamoto, John & Temkin, Nancy R. & Dikmen, Sureyya, 2004. "A new and more robust test of QALYs," Journal of Health Economics, Elsevier, vol. 23(2), pages 353-367, March.
    27. Trudy Ann Cameron, 2014. "Valuing Morbidity in Environmental Benefit-Cost Analysis," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 249-272, October.
    28. Milton C. Weinstein & Donald S. Shepard & Joseph S. Pliskin, 1980. "The Economic Value of Changing Mortality Probabilities: A Decision-Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 373-396.
    29. John M. Miyamoto & Peter P. Wakker & Han Bleichrodt & Hans J. M. Peters, 1998. "The Zero-Condition: A Simplifying Assumption in QALY Measurement and Multiattribute Utility," Management Science, INFORMS, vol. 44(6), pages 839-849, June.
    30. James Hammitt & Tuba Tunçel, 2015. "Preferences for life-expectancy gains: Sooner or later?," Journal of Risk and Uncertainty, Springer, vol. 51(1), pages 79-101, August.
    31. Trudy Cameron & J. DeShazo & Peter Stiffler, 2010. "Demand for health risk reductions: A cross-national comparison between the U.S. and Canada," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 245-273, December.
    32. James K. Hammitt, 2007. "Valuing Changes in Mortality Risk: Lives Saved Versus Life Years Saved," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 228-240, Summer.
    33. Janel Hanmer & William F. Lawrence & John P. Anderson & Robert M. Kaplan & Dennis G. Fryback, 2006. "Report of Nationally Representative Values for the Noninstitutionalized US Adult Population for 7 Health-Related Quality-of-Life Scores," Medical Decision Making, , vol. 26(4), pages 391-400, July.
    34. Pratt, John W & Zeckhauser, Richard J, 1996. "Willingness to Pay and the Distribution of Risk and Wealth," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 747-763, August.
    35. Alan Krupnick, 2007. "Mortality-risk Valuation and Age: Stated Preference Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 261-282, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James K. Hammitt, 2023. "Consistent valuation of a reduction in mortality risk using values per life, life year, and quality‐adjusted life year," Health Economics, John Wiley & Sons, Ltd., vol. 32(9), pages 1964-1981, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Herrera-Araujo, Daniel & Hammitt, James K. & Rheinberger, Christoph M., 2020. "Theoretical bounds on the value of improved health," Journal of Health Economics, Elsevier, vol. 72(C).
    2. James Hammitt, 2013. "Admissible utility functions for health, longevity, and wealth: integrating monetary and life-year measures," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 311-325, December.
    3. Daniel Bauer & Darius Lakdawalla & Julian Reif, 2018. "Mortality Risk, Insurance, and the Value of Life," NBER Working Papers 25055, National Bureau of Economic Research, Inc.
    4. Hammitt, James K., 2023. "Consistent Valuation of a Reduction in Mortality Risk using Values per Life, Life Year, and Quality-Adjusted Life Year," TSE Working Papers 23-1431, Toulouse School of Economics (TSE).
    5. James K. Hammitt, 2023. "Consistent valuation of a reduction in mortality risk using values per life, life year, and quality‐adjusted life year," Health Economics, John Wiley & Sons, Ltd., vol. 32(9), pages 1964-1981, September.
    6. James K. Hammitt & Tuba Tunçel, 2023. "Monetary values of increasing life expectancy: Sensitivity to shifts of the survival curve," Journal of Risk and Uncertainty, Springer, vol. 67(3), pages 239-269, December.
    7. James K. Hammitt, 2002. "QALYs Versus WTP," Risk Analysis, John Wiley & Sons, vol. 22(5), pages 985-1001, October.
    8. Lisa A. Robinson & James K. Hammitt, 2016. "Valuing Reductions in Fatal Illness Risks: Implications of Recent Research," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 1039-1052, August.
    9. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    10. Hammitt, James K. & Tuncel, Tuba, 2023. "Monetary values of increasing life expectancy: sensitivity to shifts of the survival curve," TSE Working Papers 23-1416, Toulouse School of Economics (TSE).
    11. Kevin Haninger & James K. Hammitt, 2011. "Diminishing Willingness to Pay per Quality‐Adjusted Life Year: Valuing Acute Foodborne Illness," Risk Analysis, John Wiley & Sons, vol. 31(9), pages 1363-1380, September.
    12. Lisa A. Robinson & James K. Hammitt, 2013. "Behavioral economics and the conduct of benefit–cost analysis: towards principles and standards," Chapters, in: Scott O. Farrow & Richard Zerbe, Jr. (ed.), Principles and Standards for Benefit–Cost Analysis, chapter 10, pages 317-363, Edward Elgar Publishing.
    13. James Hammitt & Tuba Tunçel, 2015. "Preferences for life-expectancy gains: Sooner or later?," Journal of Risk and Uncertainty, Springer, vol. 51(1), pages 79-101, August.
    14. Herrera-Araujo, Daniel & Rheinberger, Christoph M. & Hammitt, James K., 2022. "Valuing non-marginal changes in mortality and morbidity risk," Journal of Health Economics, Elsevier, vol. 84(C).
    15. James K. Hammitt, 2020. "Valuing mortality risk in the time of COVID-19," Journal of Risk and Uncertainty, Springer, vol. 61(2), pages 129-154, October.
    16. W. Kip Viscusi, 2009. "The devaluation of life," Regulation & Governance, John Wiley & Sons, vol. 3(2), pages 103-127, June.
    17. Jiakun Zheng, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Post-Print hal-04227414, HAL.
    18. James K. Hammitt & Peter Morfeld & Jouni T. Tuomisto & Thomas C. Erren, 2020. "Premature Deaths, Statistical Lives, and Years of Life Lost: Identification, Quantification, and Valuation of Mortality Risks," Risk Analysis, John Wiley & Sons, vol. 40(4), pages 674-695, April.
    19. Hammitt, James K. & Herrera-Araujo, Daniel, 2018. "Peeling back the onion: Using latent class analysis to uncover heterogeneous responses to stated preference surveys," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 165-189.
    20. Henrik Andersson & James K. Hammitt & Kristian Sundström, 2015. "Willingness to Pay and QALYs: What Can We Learn about Valuing Foodborne Risk?," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(3), pages 727-752, September.

    More about this item

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:31411. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.