Valuing Life as an Asset, as a Statistic and at Gunpoint

59 Pages Posted: 9 Apr 2018

See all articles by Julien Hugonnier

Julien Hugonnier

Swiss Federal Institute of Technology Lausanne - Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

Florian Pelgrin

EDHEC Business School; EDHEC Business School

Pascal St-Amour

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Swiss Finance Institute

Date Written: April 4, 2018

Abstract

The Human Capital (HK) and Statistical Life Values (VSL) differ sharply in their empirical pricing of a human life and lack a common theoretical background to justify these differences. We first contribute to the theory and measurement of life value by providing a unified framework to formally define and relate the Hicksian willingness to pay (WTP) to avoid changes in death risks, the HK and the VSL. Second, we use this setting to introduce an alternative life value calculated at Gunpoint (GPV), i.e. the WTP to avoid certain, instantaneous death. Third, we associate a flexible human capital model to the common framework to characterize the WTP and the three life valuations in closed-form. Fourth, our structural estimates of these solutions yield mean life values of 8.35 M$ (VSL), 421 K$ (HK) and 447 K$ (GPV). We con firm that the strong curvature of the WTP and the linear projection hypothesis of the VSL explain why the latter is much larger than other values.

Keywords: Value of Human Life, Human Capital, Value of Statistical Life, Hicksian Willingness to Pay, Equivalent Variation, Mortality, Structural Estimation

JEL Classification: J17, D15, G11

Suggested Citation

Hugonnier, Julien and Pelgrin, Florian and St-Amour, Pascal, Valuing Life as an Asset, as a Statistic and at Gunpoint (April 4, 2018). Swiss Finance Institute Research Paper No. 18-27. Available at SSRN: https://ssrn.com/abstract=3156911 or http://dx.doi.org/10.2139/ssrn.3156911

Julien Hugonnier

Swiss Federal Institute of Technology Lausanne - Ecole Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL Dorigny
Extranef
Lausanne, CH-1015
Switzerland

HOME PAGE: http://sfi.epfl.ch/hugonnier

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Florian Pelgrin

EDHEC Business School ( email )

France
Switzerland

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

Pascal St-Amour (Contact Author)

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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