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Evidence of variable discount rates and non-standard discounting in mortality risk valuation
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McDonald, Rebecca, Chilton, S. M., Jones-Lee, M. W. and Metcalf, H. R. T. (2017) Evidence of variable discount rates and non-standard discounting in mortality risk valuation. Journal of Environmental Economics and Management, 82 . pp. 152-167. doi:10.1016/j.jeem.2016.11.005
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Official URL: http://dx.doi.org/10.1016/j.jeem.2016.11.005
Abstract
Time discounting is central to the valuation of future health and mortality risks in public sector allocative decision-making, particularly for environmental policies with delayed health impacts. Using a Risk-Risk trade-off survey, we elicit discount rates for fatality risks and establish discounting functional forms on both a sample and an individual level. We find wide variation in implicit discount rates for fatality risk between individuals, as well as between-individual heterogeneity in discounting functional forms. In aggregate, the sample is best characterised by subadditive discounting. Our work has implications for the academic investigation of intertemporal choice involving mortality risks, and potentially for the evaluation of policy options with delayed mortality risk outcomes. A thought experiment cautions against the standard practice of assuming that exponential discounting characterises society's time preferences.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > H Social Sciences (General) | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Mortality -- Statistics, Risk management, Resource allocation | ||||||||
| Journal or Publication Title: | Journal of Environmental Economics and Management | ||||||||
| Publisher: | Elsevier | ||||||||
| ISSN: | 0095-0696 | ||||||||
| Official Date: | March 2017 | ||||||||
| Dates: |
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| Volume: | 82 | ||||||||
| Page Range: | pp. 152-167 | ||||||||
| DOI: | 10.1016/j.jeem.2016.11.005 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Funder: | Great Britain. Health and Safety Executive, Leverhulme Trust (LT) | ||||||||
| Grant number: | ND2484; RP2012-V-022 |
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