Document Type

Working Paper

Publication Date

2012

Keywords

empirical research, risk equity, mortality risk, Value per statistical life, social welfare functions, cost-benefit analysis, equity, fairness, welfarism, risk policy

Subject Category

Law | Public Economics | Public Policy | Social Policy | Social Welfare

Abstract

The authors examine how different welfarist frameworks evaluate the social value of mortality risk-reduction. These frameworks include classical, distributively unweighted cost-benefit analysis — i.e., the “value per statistical life” (VSL) approach — and three benchmark social welfare functions (SWF): a utilitarian SWF, an ex ante prioritarian SWF, and an ex post prioritarian SWF. They examine the conditions on individual utility and on the SWF under which these frameworks display the following five properties: i) wealth sensitivity, ii) sensitivity to baseline risk, iii) equal value of risk reduction, iv) preference for risk equity, and v) catastrophe aversion. The authors show that the particular manner in which VSL ranks risk-reduction measures is not necessarily shared by other welfarist frameworks, and they identify when the use of an ex ante or an ex post approach has different implications for risk policymaking.