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Department of Economics, Karlstad University Karlstad University Working Papers in Economics

No 11:
Valuation of small and multiple health risks: A critical analysis of SP data applied to food and water safety

Henrik Andersson, Arne Risa Hole and Mikael Svensson ()

Abstract: This study elicits individual preferences for reducing morbidity and mortality risk in the context of an infectious disease (campylobacter) using choice experiments. Respondents are in the survey asked to choose between different policies that, in addition to the two health risks, also vary with respect to source of disease being targeted (food or water), when the policy takes place (in time), and the monetary cost. Our results in our baseline model are in line with expectations; respondents prefer the benefits of the program sooner than later, programs that reduce both the mortality and morbidity risk, and less costly programs. Moreover, our results suggest that respondents prefer water- compared with food-safety programs. However, a main objective of this study is to examine scope sensitivity of mortality risk reductions using a novel approach. Our results from a split-sample design suggest that the value of the mortality risk reduction, defined as the value of a statistical life, is SEK 3 177 (USD 483 million) and SEK 50 million (USD 8 million), respectively, in our two sub-samples. This result cast doubt on the standard scope sensitivity tests in choice experiments, and the results also cast doubt on the validity and reliability of VSL estimates based on stated preference (and revealed preference) studies in general. This is important due to the large empirical literature on non-market evaluation and the elicited values’ central role in policy making, such as benefit-cost analysis.

Keywords: Choice experiments; Morbidity risk; Mortality risk; Scope sensitivity; Willingness to pay; (follow links to similar papers)

JEL-Codes: D61; H41; I18; Q51; (follow links to similar papers)

39 pages, February 6, 2014

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