Environmental Economics and Policy Making in Developing Countries
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Environmental Economics and Policy Making in Developing Countries

Current Issues

Edited by Ronaldo Seroa da Motta

The authors provide a comprehensive analysis of topics varying from the general problems of growth and conservation to specific applications such as; pollution costs, environmental taxation, deforestation and climate change. This volume also offers policymakers a comprehensive view of the challenges they face, and the legacies they leave, in order to convert environmental policy making into an actual programme of welfare improvement.
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Chapter 3: Valuing statistical lives

David Pearce


David Pearce INTRODUCTION: THE IMPORTANCE OF RISK VALUATION IN ENVIRONMENTAL COST–BENEFIT STUDIES Environmental cost–benefit studies include as benefits any reductions in the risks of premature mortality and morbidity. In turn, changes in the risks of health ‘end points’ are given economic valuations based on the willingness to pay (WTP) of those at risk to reduce the risks. Valuations may vary with the level of risk and certainly vary with the health state that is avoided, for example, people are more averse to cancer risks than risks of accident. One feature of these cost–benefit studies is that health benefits tend to dominate overall benefit estimates. Accordingly, if the basis on which the health benefits are estimated is incorrect, then the overall cost–benefit result is very likely to be incorrect. It matters a great deal, therefore, if the underlying epidemiology is correct and if the economic valuation applied to the health effects is correct. This chapter provides an overview of the issues as they relate to premature mortality only. It is designed as a background paper on the debate about the appropriate way to treat life risks in the context of environmental change. It does not seek to produce any new results, being designed mainly for reference and as a guide to the issues. Table 3.1 shows the role that health benefit valuation has played in some recent European cost–benefit studies. It can be seen that the overall...

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