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Abstract:
As economists, we believe that the Second Circuit's ruling, by not allowing the consideration of important information about the relationships between the benefits and costs of alternatives, is economically unsound. In particular, we believe that, as a general principle, regulators cannot make rational decisions unless they are allowed to compare costs and benefits and to use the results, along with other factors as appropriate, to choose among alternatives.

To the extent permissible under the statute and case law, EPA should be allowed to consider benefits and costs in establishing rules for implementing s316(b). The Court's allowing EPA to consider benefits and costs would improve both the decision making process - by making it more transparent - and the regulatory decisions by allowing important relevant information to be considered explicitly.

Abstract:
We present results for two contingent valuation surveys conducted in Hamilton, Canada and the US to elicit WTP for mortality risk reductions. We find similar Value of Statistical Life estimates across the two studies, ranging from USD 930,000 to USD 4.8 million (2000 US dollars). WTP increases with risk reduction size, but varies little with respondent age: individuals aged over 70 years hold WTP values approximately one-third lower than other respondents. Respondent health status has limited effect on WTP. These results provide little or no evidence for adjusting VSL estimates used in policy analyses for the affected population's age or health status.

Value of a Statistical Life, Mortality Risks, Benefit-cost Analysis

Abstract:
We present the results of two contingent valuation surveys conducted in Hamilton, Canada and nation-wide in the US to elicit WTP for reductions in one's risk of death. We find that the Values of a Statistical Life implied by WTP are very similar across the two studies, and range from $930,000 to $4.8 million (2000 US dollars). WTP increases with the size of the risk reduction, but varies little with the age of the respondents: people older than 70 years of age hold WTP values that are about one-third lower than those of other respondents. This effect is significant in Canada but not in the US. Health status of the respondent has limited effect on WTP. In general, these results provide only little or no evidence that VSL used in environmental policy analyses should be adjusted for the age or health status of people whose lives are saved by environmental policies.

Value of a Statistical Life, mortality risks, benefit-cost analysis

Abstract:
There is strong empirical evidence that people discount the future hyperbolically, applying larger annual discount rates to near-term returns than to returns in the distant future. The problem with hyperbolic discounting is that it leads to time-inconsistent plans - a person who discounts the future hyperbolically will not carry out the consumption plans he makes today. Hyperbolic discounting provides a rationale for lowering the required rate of return on investment projects but does not justify treating environmental projects differently from other investment projects.

The neoclassical theory of project evaluation is based on models in which agents discount the future at a constant exponential rate. But there is strong empirical evidence that people discount the future hyperbolically, applying larger annual discount rates to near-term returns than to returns in the distant future. This has led some policymakers to argue that, in evaluating programs with benefits spread over decades (such as subway systems and abatement of greenhouse gases), a low long-term discount rate should be used. In fact, some economists have suggested that higher discount rates be applied in the present and lower rates in the future.

Cropper and Laibson demonstrate that this is incorrect. The problem with hyperbolic discounting is that it leads to time-inconsistent plans - a person who discounts the future hyperbolically will not carry out the consumption plans he makes today. Cropper and Laibson note that if social decisionmakers were to use people's 1998 hyperbolic rates of time preferences, plans made in 1998 would not be followed - because the low discount rate applied to returns in, say, 2020, will become a high discount rate as the year 2020 approaches.

Since it makes sense to analyze only plans that will actually be followed, Cropper and Laibson characterize the equilibrium of an intertemporal game played by an individual who discounts the future hyperbolically. Along an equilibrium consumption path, the individual will behave as though he were discounting the future at a constant exponential rate. The individual's consumption path is, however, Pareto inferior: He would be better off if he could force himself to consume less and save more. This provides a rationale for government subsidization of interest rates or, equivalently, lowering the required rate of return on investment projects. Although hyperbolic discounting provides a rationale for lowering the required rate of return on investment projects, it does not provide justification for those who seek to treat environmental projects differently from other investment projects.

This paper - a product of Environment and Infrastructure, Development Research Group - is part of a larger effort in the group to develop benefit-cost methods for environmental decisionmaking.

Abstract:
As we understand it, the D.C. Circuit did not allow the EPA to consider the costs of complying with ozone and PM NAAQS. As we further understand it, this legal ruling can be overturned only by this Court. As economists, we believe that the D.C. Circuit's ruling not allowing the EPA to consider important information relating to the consequences of its regulatory actions is economically unsound. Without delving into the legal aspects of the case, we present below why we think the Court should allow the EPA to consider costs in setting standards. In particular, we believe that, as a general principle, regulators should be allowed to consider explicitly the full consequences of their regulatory decisions. These consequences include the regulation's benefits, costs, and any other relevant factors.

EPA, D.C. Circuit, regulatory actions

Abstract:
This paper reports the results of a survey of 5,000 households in the Greater Mumbai Region conducted in the winter of 2004. The goal of the survey was to better understand the demand for transport services by the poor, the factors affecting this demand, and the inter-linkages between transport decisions and other vital decisions such as where to live and work. This paper, the first of several research outputs, describes the salient facts about travel patterns in Mumbai for both poor and non-poor households. A striking finding of the survey is the extent to which all households-especially poor households-rely on walking. Overall, 44 percent of commuters in Mumbai walk to work. The proportion of the poor who walk to work is even higher-63 percent. Walking is an even higher modal share for non-work than for work trips. A second finding is that public transit remains an important factor in the mobility of the poor, and especially in the mobility of the middle class. Overall, rail remains the main mode to work for 23 percent of commuters, while bus remains the main mode for 16 percent of commuters. The modal shares for bus are highest for the poor in zones 1-3 (21 percent of the poor in zone 2 take the bus to work), while rail shares are highest for the poor in the suburbs (25 percent of the poor in zone 6 take rail to work). Is the cost and lack of accessibility to transit a barrier to the mobility of the poor? Does it keep them from obtaining better housing and better jobs? This is a difficult question to answer without further analysis of the survey data. But it appears that transport is less of a barrier to the poor who live in central Mumbai (zones 1-3) than it is to the poor who live in the suburbs (zones 4-6). The poor who live in zones 1-3 (central Mumbai) live closer to the non-poor than do poor households in the suburbs. They also live closer to higher-paying jobs for unskilled workers. Workers in these households, on average, commute short distances (less than 3 kilometers), although a non-negligible fraction of them (one-third in zone 2) take public transit to work. It is true that the cost of housing for the poor is higher in central Mumbai than in the suburbs, but the quality of slum housing is at least as good in central Mumbai as in the suburbs. The poor who live in the suburbs of Mumbai, especially in zones 5 and 6, are more isolated from the rich than the poor in central Mumbai: 37 percent of the poor live in zones 5 and 6, whereas only one-fifth of higher income groups do. Wages for skilled and unskilled labor are generally lower in zones 5 and 6 than in the central city, and it appears that unemployment rates for poor males are also higher in these zones. The lower cost of slum and chawl housing in zones 5 and 6 may partly compensate for lower wages. However, a larger proportion of workers in poor households leave zones 5 and 6 to work than is true for poor workers in other zones. Commuting distances are much higher for poor workers in the suburbs than for poor workers in zones 1-3.

Abstract:
Bento, Cropper, Mobarak, and Vinha combine measures of urban form and public transit supply for 114 urbanized areas with the 1990 Nationwide Personal Transportation Survey to address two questions: (1) How do measures of urban form, including city shape, road density, the spatial distribution of population, and jobs-housing balance affect the annual miles driven and commute mode choices of U.S. households? (2) How does the supply of public transportation (annual route miles supplied and availability of transit stops) affect miles driven and commute mode choice?

The authors find that jobs-housing balance, population centrality, and rail miles supplied significantly reduce the probability of driving to work in cities with some rail transit. Population centrality and jobs-housing balance have a significant impact on annual household vehicle miles traveled (VMT), as do city shape, road density, and (in rail cities) annual rail route miles supplied. The elasticity of VMT with respect to each variable is small, on the order of 0.10-0.20 in absolute value. However, changing several measures of form simultaneously can reduce annual VMT significantly. Moving the sample households from a city with the characteristics of Atlanta to a city with the characteristics of Boston reduces annual VMT by 25 percent.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to examine factors affecting travel behavior.

Abstract:
Particulate air pollution has less overall impact on nontraumatic deaths in Delhi, India, than in U.S. cities. But the deaths occur earlier in life in Delhi, which could mean a larger loss in life-years.

Cropper, Simon, Alberini, and Sharma report the results of a time-series study of the impact of particulate air pollution on daily mortality in Delhi. They find:

A positive, significant relationship between particulate pollution and daily nontraumatic deaths as well as deaths from certain causes (respiratory and cardiovascular problems) and for certain age groups.

In general, these impacts are smaller than those estimated for other countries, where on average a 100-microgram increase in total suspended particulates (TSP) leads to a 6-percent increase in nontraumatic mortality. In Delhi, such an increase in TSP is associated with a 2.3-percent increase in deaths.

The differences in magnitudes of the effects are most likely explained by differences in distributions of age at death and cause of death, as most deaths in Delhi occur before the age of 65 and are not attributed to causes with a strong association with air pollution.

Although air pollution seems to have less impact on mortality counts in Delhi, the number of life-years saved per death avoided is greater in Delhi than in U.S. cities-because the age distribution of impacts in these two places varies. In the United States particulates have the greatest influence on daily deaths among persons 65 and older. In Delhi, they have the greatest impact in the 15-to-44 age group. That means that for each death associated with air pollution, on average more life-years would be saved in Delhi than in the United States.

Large differences in the magnitude of effects do call into question the validity of the concentration-response transfer procedure. In that procedure, concentration-response relationships found for industrial countries are applied to cities in developing countries with little or no adjustment, to estimate the effects of pollution on daily mortality.

This paper-a product of Development Economics Research Group-is part of a larger effort in the group to examine the benefits and costs of pollution control. The study was funded by the Bank's Research Support Budget under research project Measuring the Health Effects of Air Pollution in Developing Countries: The Case of Delhi, India (RPO 679-96). Maureen Cropper may be contacted at mcropper@worldbank.org.

Abstract:
Kopits and Cropper examine the impact of income growth on the death rate due to traffic fatalities, as well as on fatalities per motor vehicle and on the motorization rate (vehicles/population) using panel data from 1963-99 for 88 countries. Specifically, they estimate fixed effects models for fatalities/population, vehicles/population, and fatalities/vehicles and use these models to project traffic fatalities and the stock of motor vehicles to 2020.

The relationship between motor vehicle fatality rate and per capita income at first increases with per capita income, reaches a peak, and then declines. This is because at low income levels the rate of increase in motor vehicles outpaces the decline in fatalities per motor vehicle. At higher income levels, the reverse occurs. The income level at which per capita traffic fatalities peaks is approximately $8,600 in 1985 international dollars. This is within the range of income at which other externalities, such as air and water pollution, have been found to peak. Projections of future traffic fatalities suggest that the global road death toll will grow by approximately 66 percent between 2000 and 2020. This number, however, reflects divergent rates of change in different parts of the world - a decline in fatalities in high-income countries of approximately 28 percent versus an increase in fatalities of almost 92 percent in China and 147 percent in India. The authors also predict that the fatality rate will rise to approximately 2 per 10,000 persons in developing countries by 2020, while it will fall to less than 1 per 10,000 in high-income countries.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study the externalities associated with motorization.

Abstract:
The authors compare the welfare effects of in situ slum upgrading programs with programs that provide slum dwellers with better housing in a new location. Evaluating the welfare effects of slum upgrading and resettlement programs requires estimating models of residential location choice, in which households trade off commuting costs against the cost and attributes of the housing they consume, including neighborhood attributes. The authors accomplish this using data for 5,000 households in Mumbai, a city in which 40 percent of the population live in slums. The precise welfare effects of resettlement programs depend on assumptions made about the ease with which workers can change jobs and also on the ethnic characteristics of neighborhoods in which new housing is located. To illustrate this point the authors consider a realistic slum upgrading program that could be offered to residents in their sample living in east Mumbai. They summarize the effects of job opportunities and neighborhood composition on welfare by mapping how compensating variation for the program changes depending on where in Mumbai improved housing is located. If program beneficiaries continue working in their original job, the set of welfare-enhancing locations for the upgrading program is small. The set increases greatly if it is assumed that workers can change jobs. The benefits of this program are contrasted with the benefits of in situ housing improvements.

Housing & Human Habitats, Urban Slums Upgrading, Urban Services to the Poor, Urban Housing, Municipal Housing and Land

Abstract:
Mobarak, Rajkumar, and Cropper examine the impact of local politics and government structure on the allocation of publicly subsidized (SUS) health services across municipios (counties) in Brazil, and on the probability that uninsured individuals who require medical attention actually receive access to those health services. Using data from the 1998 PNAD survey they demonstrate that higher per capita levels of SUS doctors, nurses, and clinic rooms increase the probability that an uninsured individual gains access to health services when he or she seeks it. The authors find that an increase in income inequality, an increase in the percentage of the population that votes, and an increase in the percentage of votes going to left-leaning candidates are each associated with higher levels of public health services. The per capita provision of doctors, nurses, and clinics is also greater in counties with a popular local leader and in counties where the county mayor and state governor are politically aligned. Administrative decentralization of health services to the county decreases provision levels and reduces access to services by the uninsured unless it is accompanied by good local governance.

This paper is a product of the Infrastructure and Environment Team, Development Research Group.

Abstract:
This paper describes the role of public transport and the nature and incidence of transport subsidies in Mumbai, India. Mumbai has an extensive rail and bus network, and public transport is used for over 75 percent of all motorized trips in Greater Mumbai. Both rail and bus fares in Mumbai are subsidized: BEST, which operates public buses in Mumbai, is also an electric utility, and subsidizes bus fares from electricity revenues. We analyze the incidence of these subsidies, and their effect on mode choice, using data from a survey of households in Greater Mumbai. In Mumbai, as in many cities, the middle class is more likely to use public transport for travel than the poor. The poor, however, also use public transit, and their expenditure on public transit constitutes, on average, a larger share of their income than it does for the middle class. It is, therefore, the case that the poor benefit from transit subsidies in Mumbai, as well as the middle and upper-middle classes; however, the poorest 27 percent of the population receives only 19 percent of bus subsidies and 15.5 percent of rail subsidies. Indeed, 26 percent of the lowest income households surveyed do not use rail, while 10 percent do not use bus, implying that they receive no transit subsidies.

Expenditure on transport accounts for 16 percent of income in the lowest income category (<5000 Rs./month), with 10 percent of income, on average, spent on bus and rail fares. This percentage, however, is not evenly distributed: it is much higher than 10 percent for households in which workers take the bus or train to work, and lower for households in which the main earner walks to work. Even in these households, however, 12.5 percent of income is spent on transportation.

Expenditure on public transport would be even higher if bus fares in Mumbai were not subsidized. In 2005-2006, transport revenues of BEST fell below total costs by 30 percent and below operating costs by 20 percent. Rail fares, which are much lower than bus fares per km traveled, officially covered operating costs and almost covered depreciation expenses.

Abstract:
This paper examines whether the relationship between traffic fatalities and per capita income is the same for different classes of road users and investigates the factors underlying the decline in fatalities per vehicle kilometer traveled (VKT) observed in high-income countries over recent decades. Formal models of traffic fatalities are developed for vehicle occupants and pedestrians. Reduced-form approximations to these models are estimated using panel data for 32 high-income countries over 1964-2002. The results suggest that the downward-sloping portion of the curve relating traffic fatalities per capita to per capita income is due primarily to improved pedestrian safety. Our more detailed models shed light on some factors influencing pedestrian fatalities per VKT but much of the reduction in pedestrian fatalities remains unexplained; however, increased motorization and a reduction in the proportion of young drivers in the population clearly played a role. Occupant fatalities, however, do not show a significant decline with income. What does explain declines in occupant fatalities per distance traveled are reductions in alcohol abuse and improved medical services, and a reduction in young drivers. The importance of demographic factors suggests that in countries where young persons (between 15 and 24 years of age) comprise an increasing share of the driving population, adopting policies to improve young driver education and reduce speeds will be crucial.

Abstract:
This paper examines the impacts of measures to reduce emissions from buses, cars, and two-wheelers in Mumbai, India. We have considered three possible policies: conversion of diesel buses to CNG, an increase in the price of gasoline and a tax on vehicle ownership.

Our results suggest that the most effective policy to reduce emissions from passenger vehicles - in terms of the total number of tons of PM10 reduced - is to convert diesel buses to CNG. The conversion of 3,391 diesel buses to CNG would result in an emissions reduction of 663 tons of PM10 per year, 14 percent of total emissions from transport.

Abstract:
This paper examines the impact of measures to reduce emissions from passenger transport, specifically buses, cars, and two-wheelers in Mumbai. These include converting diesel buses to compressed natural gas (CNG), as the Indian Supreme Court required in Delhi, which would necessitate an increase in bus fares to cover the cost of pollution controls. The authors model an increase in the price of gasoline, which should affect the ownership and use of cars and two-wheelers, as well as imposing a license fee on cars to retard growth in car ownership. The impact of each policy on emissions depends not only on how the policy affects the mode that is regulated, but on shifts to other modes. The results suggest that the most effective policy to reduce emissions from passenger vehicles - in terms of the total number of tons of PM10 (particulate matter that measure less than or equal to 10 micrometers in aerodynamic diameter) reduced - is to convert diesel buses to CNG. The conversion of 3,391 diesel buses to CNG would result in an emissions reduction of 663 tons of PM10 a year, 14 percent of total emissions from transport. The bus conversion program passes the cost-benefit test. In contrast, the results suggest the elasticities of emissions from transport with respect to a gasoline tax and a tax on vehicle ownership are -0.04 and -0.10 respectively. As a consequence, it would take substantial increases in the gasoline tax or vehicle ownership tax to produce reductions in emissions similar to the bus conversion program. These results, however, reflect the low shares of cars and two-wheelers in the Mumbai emissions inventory and need not apply to cities, such as Delhi, where these shares are higher.

Transport Economics Policy & Planning, Transport in Urban Areas, Transport and Environment, Roads & Highways, Urban Transport

Abstract:
Using results from two contingent valuation surveys conducted in Canada and the U.S., we explore the effect of a latency period on willingness to pay (WTP) for reduced mortality risk using both structural and reduced form approaches. We find that delaying the time at which the risk reduction occurs by 10 to 30 years reduces WTP by more than half for respondents in both samples aged 40 to 60 years. Additionally, we estimate implicit discount rates equal to 8% for Canada and 4.5% for the U.S. - both well within the range established previously in the literature.

Value of a statistical life, Mortality risks, Benefit-cost analysis

Abstract:
Population pressures play less of a role in deforestation than earlier studies of Thailand found.

Between 1976 and 1989, Thailand lost 28 percent of its forest cover. To analyze how road building, population pressure, and geophysical factors affected deforestation in Thailand during that period, Cropper, Griffiths, and Mani develop a model in which the amount of land cleared, the number of agricultural households, and the size of the road network are jointly determined.

The model assumes that the amount of land cleared reflects an equilibrium in the land market. Hence, in the long run, the amount cleared depends on the profitability of agriculture and on the long-run costs of clearing. The size of the country's agricultural population, as well as the size of the road network, affects the demand for cleared land and hence the amount cleared in equilibrium.

The authors estimate an equation to explain the amount of land cleared in equilibrium, using data for the 58 provinces that were forested in 1973. Data from five years (1976, 1978, 1982, 1985, and 1989) are combined to estimate the equilibrium model.

They find that the number of agricultural households and road density both increase the fraction of each provinced cleared, but their effects are small. The elasticity of cleared land with respect to agricultural households is only 0.12; with respect to road density, it is only 0.26.
These effects do differ by region, however; moreover, the elasticities of forest area with respect to population density and road density are larger in absolute value than the respective elasticities for cleared land. The elasticity of forest-to-total area with respect to population density is -0.41 for the North/Northeast section of the country and -0.22 for the South/Central region. The corresponding elasticities with respect to road density are -0.20 and -1.09.

This suggests that population pressures play less of a role in deforestation than earlier studies of Thailand found. For an area to remain deforested, it must be profitable to convert the land to another use, and that use is usually agriculture. Steep slopes and poor soil quality provide some natural protection for forests, although the quantitative impact of those factors vary. Variations in agricultural prices also affect the amount of deforestation.

This paper - a product of the Environment, Infrastructure, and Agriculture Division, Policy Research Department - is part of a larger effort in the department to understand the forces affecting land use change. The study was funded by the Bank's Research Support Budget under research project Population Growth and the Environment (RPO 678-59).

Abstract:
Despite the great benefits from preventing malaria, the fact that vaccine demand is price inelastic suggests that it will be difficult to achieve significant market penetration unless the vaccine is subsidized. The results are similar for bed nets treated with insecticide.

Cropper, Haile, Lampietti, Poulos, and Whittington measure the monetary value households place on preventing malaria in Tembien, Tigray Region, Ethiopia. They estimate a household demand function for a hypothetical malaria vaccine and compute the value of preventing malaria as the household's maximum willingness to pay to provide vaccines for all family members. They contrast willingness to pay with the traditional costs of illness (medical costs and time lost because of malaria).

Their results indicate that the value of preventing malaria with vaccines is about US$36 a household a year, or about 15 percent of imputed annual household income. This is, on average, about two or three times the expected household cost of illness.

Despite the great benefits from preventing malaria, the fact that vaccine demand is price inelastic suggests that it will be difficult to achieve significant market penetration unless the vaccine is subsidized.

The authors obtain similar results for insecticide-treated bed nets. Their estimates of household demand functions for bed nets suggest that at a price that might permit cost recovery (US$6 a bed net), only a third of the population of a 200-person village would sleep under bed nets.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to promote efficient resource allocation within the health sector. The authors may be contacted at mcropper@worldbank.org, jlampietti@worldbank.org, cpoulos@email.unc.edu, or dwhittin@imap.unc.edu.

Abstract:
The authors interviewed commuters in Delhi, India, asking them to report their willingness to pay (WTP) to reduce their risk of dying in road traffic accidents in each of three scenarios that mirror the circumstances under which the majority of the road fatalities in Delhi occur. The WTP responses are internally valid, in the sense that WTP increases with the size of the risk reduction, income, and exposure to road traffic risks, as measured by length of commute and whether the respondent drives a two-wheeler. As a result, the value of a statistical life (VSL) is individuated - that is, it varies across groups of beneficiaries. For the most likely beneficiaries of road safety programs - the most highly exposed individuals - the VSL is about 150,000 PPP$.

Transport Economics Policy & Planning, Roads & Highways, Airports and Air Services, Road Safety, Insurance & Risk Mitigation

Abstract:
Do funding priorities for health and safety policies reflect irrational fears? the disaster of the month - rather than address more fundamental problems? A thousand people were surveyed to gauge popular feelings about funding choices between environmental and public health programs.

In developing and industrial countries alike, there is concern that health and safety policy may respond to irrational fears - to the disaster of the month - rather than address more fundamental problems.

In the United States, for example, some policymakers say the public worries about trivial risks while ignoring larger ones and that funding priorities reflect this view. Many public health programs with a low cost per life saved are underfunded, for example, while many environmental regulations with a high cost per life saved are issued each year.

Does the existing allocation of resources reflect people's preoccupation with the qualitative aspects of risks, to the exclusion of quantitative factors (lives saved)? Or can observed differences in the cost per life saved of environmental and public health programs be explained by the way the two sets of programs are funded?

Cropper and Subramanian examine the preferences of U.S. citizens for health and safety programs. They confronted a random sample of 1,000 U.S. adults with choices between environmental health and public health programs, to see which they would choose. The authors then examined what factors (qualitative and quantitative) seem to influence these choices. Respondents were asked about pairs of programs, among them: smoking education or industrial pollution control programs, industrial pollution control or pneumonia vaccine programs, radon eradication or a program to ban smoking in the workplace, and radon eradication or programs to ban pesticides.

The survey results, they feel, have implications beyond the United States. They find that, while qualitative aspects of the life-saving programs are statistically significant in explaining people's choices among them, lives saved matter, too. Indeed, for the median respondent in the survey, the rate of substitution between most qualitative risk characteristics and lives saved is inelastic. But for a sizable minority of respondents, choice among programs appears to be insensitive to lives saved. The interesting question for public policy is what role the latter group plays in the regulatory process.

This paper - a joint product of the Environment, Infrastructure, and Agriculture Division, Policy Research Department, and the Environment and Natural Resources Division, Asia Technical Department - is part of a larger effort in the Bank to see what can be learned about efficient environmental policy by examining the U.S. experience with environmental regulation. The authors may be contacted at mcropper@worldbank.org or usubramanian@worldbank.org.

Abstract:
Conducting cost-benefit analyses of health and safety regulations requires placing a dollar value on reductions in health risks, including the risk of death. Compensating-wage differentials, which are often used to estimate the value of risk reductions, suggest that compensation for the loss of a statistical life in Indian manufacturing would be between 6.4 million and 15 million in 1990 rupees (roughly $150,000 to $360,000).

Conducting cost-benefit analyses of health and safety regulations requires placing a dollar value on reductions in health risks, including the risk of death. In the United States, mortality risks are often valued using compensating-wage differentials. These differentials measure what a worker would have to be paid to accept a small increase in his risk of death-which is assumed to equal what the worker would pay to achieve a small reduction in his risk of death.

Simon, Cropper, Alberini, and Arora estimate compensating-wage differentials for risk of fatal and nonfatal injuries in India's manufacturing industry. They estimate a hedonic wage equation using the most recent Occupational Wage Survey, supplemented by data on occupational injuries from the Indian Labour Yearbook.

Their estimates of compensating-wage differentials imply a value of statistical life (VSL) in India of 6.4 million to 15 million 1990 rupees (roughly $150,000 to $360,000 at current exchange rates). This number is between 20 and 48 times forgone earnings-the human capital measure of the value of reducing the risk of death.

The ratio of the VSL to forgone earnings implied by the study is larger than in comparable U.S. studies but smaller than the ratio implied by the only other compensating-wage study for India (Shanmugam 1997). The latter implies a ratio of VSL to forgone earnings of 73!

The authors caution that in India, as in the United States, compensating-wage differentials in the labor market may overstate what individuals would themselves pay to reduce the risk of death. They suggest using their estimates as an upper bound on willingness to pay to reduce risk of death, and forgone earnings as a lower bound.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to promote the use of benefit-cost analysis in evaluating environmental programs. The study was funded by the Bank's Research Support Budget under research project Valuing Mortality Reductions in India: A Study of Compensating Wage Differentials (RPO 680-84).

Abstract:
Establishing protected areas (national parks together with wildlife sanctuaries) in North Thailand did not reduce the likelihood of forest clearing, but wildlife sanctuaries may have reduced the probability of deforestation. Where new roads are located affects how much of a threat they are to protected areas.

Using plot-level data, Cropper, Puri, and Griffiths estimate a bivariate probit model to explain land clearing and the siting of protected areas in North Thailand in 1986.

Their model suggests that protected areas (national parks together with wildlife sanctuaries) did not reduce the likelihood of forest clearing, but wildlife sanctuaries may have reduced the probability of deforestation.

Road building, by reducing the impedance-weighted distance to market, has promoted clearing, especially near the forest fringe.

The authors simulate the impact of further road building to show where road building is likely to have the greatest impact on forest clearing and where it is likely to threaten protected areas.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to examine factors affecting deforestation in developing countries. The study was funded by the Bank's Research Support Budget under the research project "Spatial Models of Environmental Processes: A Study of Deforestation in Thailand" (RPO 683-17). The authors may be contacted at mcropper@worldbank.org, jpuri@worldbank.org, or griffiths.charles@epa.gov.

Abstract:
Benefit-cost analyses of disaster risk reduction (DRR) projects are an important tool for evaluating the efficiency of such projects, and an important input into decision making. These analyses, however, often fail to monetize the benefits of reduced death and injury. The authors review the literature on valuing reduced death and injury, and suggest methods for calculating order-of-magnitude estimates of these benefits. Because few empirical estimates of the Value of a Statistical Life (VSL) are available for developing countries, methods for transferring estimates from high income to middle and low income countries are reviewed. The authors suggest using the range of values implied by an income elasticity of 1.0 and an elasticity of 1.5. With regard to injury valuation they discuss arguments for and against monetizing Quality Adjusted Life Years, and provide shortcuts to valuing injuries that may be used to assess their importance in DRR benefit-cost analyses.

Health Monitoring & Evaluation, Transport Economics Policy & Planning, Economic Theory & Research, Hazard Risk Management, Environmental Economics & Policies

Abstract:
Title IV of the 1990 Clean Air Act Amendments (CAAA) established a market for transferable sulfur dioxide (SO2) emission allowances among electric utilities. This market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit SO2 from firms with lower costs, and this is expected to yield cost savings compared to a command-and-control approach to environmental regulation. This paper uses econometrically estimated marginal abatement cost functions for power plants affected by Title IV of the CAAA to evaluate the performance of the SO2 allowance market. Specifically, we investigate whether the much-heralded fall in the cost of abating SO2, compared to original estimates, can be attributed to allowance trading. We demonstrate that, for plants that use low-sulfur coal to reduce SO2 emissions, technical change and the fall in prices of low-sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985. The flexibility to take advantage of these changes is the main source of cost reductions, rather than trading per se. In the long run, allowance trading may achieve cost savings of $700-$800 million per year compared to an "enlightened" command-and-control program characterized by a uniform emission rate standard. The cost savings would be twice as great if the alternative to trading were forced scrubbing. However, a comparison of potential cost savings in 1995 and 1996 with actual emissions costs suggests that most trading gains were unrealized in the first two years of the program.

Abstract:
We analyze EPA's cleanup decisions at over 100 Superfund sites and examine whether and how EPA trades off the cost against the permanence of cleanup. EPA's decisions reveal both a preference for permanent solutions and an aversion to cost. For example, EPA prefers incinerating soils to isolating and containing them in place, but not at any price. At larger sites EPA appears willing to accept additional costs of as much as $40 million to incinerate. With regard to environmental equity, we find little evidence that EPA's cost-permanence tradeoff is affected by socioeconomic characteristics in the communities surrounding the sites.