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Skills of the trade: valuing health risk reductions in benefit-cost analysis

1 / James K. Hammitt2

1Senior Fellow, Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School, USA

2Harvard University (Center for Risk Analysis), USA and Toulouse School of Economics (LERNA-INRA), France

Corresponding author: Lisa A. Robinson, Senior Fellow, Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School, USA

Citation Information: Journal of Benefit-Cost Analysis. Volume 4, Issue 1, Pages 107–130, ISSN (Online) 2152-2812, ISSN (Print) 2194-5888, DOI: 10.1515/jbca-2012-0006, March 2013

Publication History

Published Online:
2013-03-28

Abstract

Many public policies and private actions affect the risk of injury, illness, or death, yet changes in these risks are not easily valued using market prices. We discuss how to value these risk reductions in the context of benefit-cost analysis. We begin with a pragmatic focus, describing the analytic framework and the approaches currently used for valuation, including estimates of willingness to pay, cost of illness, and monetized quality-adjusted life years. We then turn to some conceptual issues that illustrate areas in need of further exploration.

Keywords: benefit-cost analysis; cost of illness; health risk valuation; value per statistical life; willingness to pay; quality-adjusted life year

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