Do the Benefits of COVID-19 Policies Exceed the Costs? Exploring Uncertainties in the Age-VSL Relationship

Robinson, L.A., R. Sullivan, J. Shogren, Do the Benefits of COVID-19 Policies Exceed the Costs? Exploring Uncertainties in the Age-VSL Relationship, Risk Analysis, Early View, 2020.

13 Pages Posted: 15 Jun 2020 Last revised: 20 Jul 2020

See all articles by Lisa A. Robinson

Lisa A. Robinson

Harvard University, Center for Health Decision Science; Harvard University, Center for Risk Analysis

Ryan Sullivan

Naval Postgraduate School

Jason F. Shogren

University of Wyoming

Date Written: June 14, 2020

Abstract

Numerous analyses of the benefits and costs of COVID-19 policies have been completed quickly as the crisis unfolds. The results frequently depend largely on the approach used to value mortality risk reductions, typically expressed as the value per statistical life (VSL). Many analyses rely on a population-average VSL estimate of $10 million; some adjust VSL for life expectancy at the age of death. We explore the implications of theory and empirical studies which suggest that the relationship between age and VSL is uncertain. We compare the effects of three approaches: (1) an invariant population-average VSL; (2) a constant value per statistical life-year (VSLY); and (3) a VSL that follows an inverse-U pattern, peaking in middle age. We find that when applied to the U.S. age distribution of COVID-19 deaths, these approaches result in average VSL estimates of $10.63 million, $4.47 million, and $8.31 million. We explore the extent to which applying these estimates alter the conclusions of frequently cited analyses of social distancing, finding that they significantly affect the findings. However, these studies do not address other characteristics of COVID-19 deaths that may increase or decrease the values. Examples include the health status and income level of those affected, the size of the risk change, and the extent to which the risk is dreaded, uncertain, involuntarily incurred, and outside of one’s control. The effects of these characteristics and their correlation with age are uncertain; it is unclear whether they amplify or diminish the effects of age on VSL.

Keywords: Value per Statistical Life, VSL, COVID-19, Pandemic, Willingness to Pay, Benefit-Cost Analysis

JEL Classification: H51, I18, J17, J18

Suggested Citation

Robinson, Lisa A. and Sullivan, Ryan and Shogren, Jason F., Do the Benefits of COVID-19 Policies Exceed the Costs? Exploring Uncertainties in the Age-VSL Relationship (June 14, 2020). Robinson, L.A., R. Sullivan, J. Shogren, Do the Benefits of COVID-19 Policies Exceed the Costs? Exploring Uncertainties in the Age-VSL Relationship, Risk Analysis, Early View, 2020., Available at SSRN: https://ssrn.com/abstract=3626710 or http://dx.doi.org/10.2139/ssrn.3626710

Lisa A. Robinson (Contact Author)

Harvard University, Center for Health Decision Science ( email )

718 Huntington Avenue
Harvard T.H. Chan School of Public Health
Boston, MA 02115
United States

HOME PAGE: http://https://www.hsph.harvard.edu/lisa-robinson/

Harvard University, Center for Risk Analysis ( email )

Harvard T.H. Chan School of Public Health
718 Huntington Avenue
Boston, MA 02115
United States

HOME PAGE: http://https://www.hsph.harvard.edu/lisa-robinson/

Ryan Sullivan

Naval Postgraduate School ( email )

1 University Circle
Monterey, CA 93943-5001
United States

Jason F. Shogren

University of Wyoming ( email )

Department of Economics
BU292
Laramie, WY 82071-3985
United States
307-766-5430 (Phone)
307-766-5090 (Fax)

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