Valuing Nonfatal Health Risk Reductions in Global Benefit‐Cost Analysis
32 Pages Posted: 7 Feb 2022
Date Written: March 12, 2018
In benefit-cost analysis, ideally the values placed on nonfatal risk reductions would reflect the preferences of those affected by a policy; i.e., individuals’ willingness to exchange their own income to achieve a reduction in their own risk. Presumably, this willingness to pay (WTP) accounts for both the pecuniary effects of the risk change (e.g., out-of-pocket medical expenses and earnings) and the non-pecuniary effects (e.g., pain and suffering and other quality of life impacts). However, for nonfatal risk reductions, relatively few WTP studies are available. Thus the main challenge faced by analysts often is to determine how to best value these risk changes in the absence of WTP estimates. Typically, two approaches are used either alone or in combination. The first involves applying an estimate of the costs that are averted when incidence is reduced, including medical costs and productivity losses. These costs may be borne by the individual, his or her family or household, and society at large. Because these costs do not address the value of averted pain and suffering or other quality of life impacts, monetized estimates of quality-adjusted life years (QALYs) or disability-adjusted life years (DALYs) are often added. We discuss the general framework for valuation and its practical implementation, developing recommendations for the application of these measures to value nonfatal risk reductions in low- and middle-income countries.
Keywords: willingness to pay, nonfatal risk reductions, value per QALY, value per DALY, cost of illness
JEL Classification: D61, H43, I15, I31
Suggested Citation: Suggested Citation