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The willingness to accept value of statistical life relative to the willingness to pay value: Evidence and policy implications

Lookup NU author(s): Emeritus Professor Michael Jones-Lee, Professor Graham Loomes

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Abstract

Large disparities between willingness to accept (WTA) and willingness to pay (WTP) based values of statistical life are commonly encountered in empirical studies. Standard economic theory suggests that if a public good is easily substitutable there should be no marked disparity between WTA and WTP values for the good, though the disparity increases with reduced substitutability. However, psychologists have shown that people often treat gains and losses asymmetrically and tend to require a substantially larger increase in wealth to compensate for a loss than the amount they would be willing to pay for an equivalent gain. Although most transport projects may aim to improve safety, situations arise when a relaxation of an existing regulation saves resources but increases the risk of death and injuries. A survey was recently carried out in New Zealand to determine people's willingness to pay to reduce road risks and their willingness to accept compensation for an increase in risk. This paper reports the disparity observed between the two measures and considers some of the problems posed for policymakers. © Springer 2005.


Publication metadata

Author(s): Guria J, Leung J, Jones-Lee M, Loomes G

Publication type: Article

Publication status: Published

Journal: Environmental and Resource Economics

Year: 2005

Volume: 32

Issue: 1

Pages: 113-127

ISSN (print): 0924-6460

ISSN (electronic): 1573-1502

Publisher: Springer Netherlands

URL: http://dx.doi.org/10.1007/s10640-005-6030-6

DOI: 10.1007/s10640-005-6030-6


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