Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 103: The Value of Private Safety versus the Value of Public Safety

Magnus Johannesson (), Per-Olov Johansson () and Richard M. O'Conor
Additional contact information
Magnus Johannesson: Department of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Per-Olov Johansson: Department of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Richard M. O'Conor: Department of Economics, Postal: Stockholm School of Economics, Box 6501, S-113 83 Stockholm, Sweden.

Abstract: In this study we report an attempt to measure the WTP of car owners for a reduction of the probability of being killed in a traffic accident. One group of respondents is offered a safety device to be installed in their car, while another group is offered a public safety program (improved road quality) which results in the same size risk reduction. In terms of the value of a statistical life, our results are very reasonable. Moreover, there is a strong positive correlation between the magnitude of the WTP for the private safety device and the risks a respondent faces in traffic. However, the WTP for the private safety device is higher than the WTP for the public safety measure. Drawing on a model developed by Jones-Lee (1991), we show that a pure altruist may, but need not, be willing to pay more for a private risk reduction than for a uniform risk reduction of the same magnitude. This is also true for a wealth-focused altruist. Still, our empirical results are surprising, and further empirical research seems warranted.

Keywords: Safety; willingness to pay; altruism; environment; traffic

JEL-codes: D61; D91; H51; I10; I12

18 pages, February 1996

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