Tuesday, January 14, 2014

Household Decision-Making and Valuation of Environmental Health Risks to Parents and their Children

This paper empirically discriminates between alternative household decisionmaking models for estimating parents’ willingness to pay for health risk reductions for their children as well as for themselves. Models are tested using data pertaining to heart disease from a stated preference survey involving 432 matched pairs of parents married to one another. Analysis is based on a collective model of parental resource allocation that incorporates household production of perceived health risks and allows for differences in preferences and risk perceptions between parents. Results are consistent with Pareto efficiency within the household, which implies that (1) for a given proportionate reduction in health risk, parents are willing to pay the same amount of money at the margin to protect themselves and the child; and (2) parents’ choices about proportionate health risk reductions for their children are based on household valuations, rather than their own individual valuations. Results also suggest that the marginal willingness to pay of mothers and fathers for health risk protection is sensitive to a shift in intra-household decision-making power between parents.
illustration of a woman's body showing how a heart attack affects the body, inside and out
To value reductions in heart disease risks, parents were told that they would be asked about their purchase intentions for each of two vaccines. One of the hypothetical vaccines reduced risk for the parent and the other reduced risk for the child. The two vaccines were presented one at a time in random order. Parents were told that the vaccines would slow the build-up of fatty deposits in the arteries, would be taken by injection annually, and would provide additional protection from coronary artery disease beyond the benefits that could be obtained from eating right and getting enough exercise. As the vaccines were described, their effectiveness was varied at random. Parents were assigned risk reductions of either 10% or 70% of their revised risk assessment, and children were assigned risk reductions of either 20% or 80%. Each parent in a matched air was assigned the same percentage risk reduction for the child, which always was larger than that assigned to either parent. Parents were told that risk reductions would be larger for children because the vaccination program produced greater benefits if it was initiated earlier in life. Each parent was asked to read the description of each vaccine and then was shown the previously marked risk scales for herself or for her child, which now indicated the risk reduction offered by the vaccine and the amount of risk remaining if the vaccine was purchased. Parents also were shown how the vaccine would shift the hazard function to reflect lower heart disease risks over time.  For the vaccine to reduce the child’s risk, parents were asked, “Would you be willing to pay $p to put your child in the heart disease vaccination program for the first year?” The value of $p was randomly chosen from the five values $10, $20, $40, $80, $160. These values of p were selected on the basis of focus group input and pretest
Estimates indicate that annual household marginal willingness to pay to reduce the child’s risk by 1 chance in 100 of being diagnosed with heart disease by the age of 75 is $7.07 (standard error - s .e. = $2.12) for mothers and $3.79 (s.e. = $1.31) for fathers.
A statistically significant within-household difference is found between mothers’ and fathers’ marginal willingness to pay to reduce their own heart disease risk by an absolute amount. The annual marginal willingness to pay of mothers to reduce their own risk of heart disease by 1 chance in 100 prior to the age of 75 is $6.02 (s.e. = $1.83), whereas for fathers the corresponding estimate is $1.90 (s.e. = $0.93). The null hypothesis that marginal willingness to pay of mothers for a 1 chance in 100 reduction in heart disease risk equates to that for fathers is rejected at the 5% level of significance.  Additionally, consistent with results of Hammitt and Haninger (2010) and Alberini and Scasny (2011), parents’ marginal willingness to pay to reduce heart disease risk by 1 chance in 100 for their children is larger than their marginal willingness to pay to reduce this risk for themselves, although these differences are not different from zero at conventional levels of significance.
Mothers and fathers are willing to make annual payments of $2.27 and $1.06, respectively, to reduce their own heart disease risk by one percentage point. Parents’ estimates of household annual marginal willingness to pay to reduce their child’s risk by one percentage point by age 75 are $2.15 for mothers and $1.43 for fathers.

by Wiktor Adamowicz a, Mark Dickie b, Shelby Gerking b, c, Marcella Veronesi d,e, David
Zinner a
a Department of Resource Economics and Environmental Sociology, University of Alberta, T6G
2H1, Edmonton, Alberta, Canada,
b Department of Economics, University of Central Florida, P.O. Box 1400, Orlando, FL 32816-
1400, United States
c Department of Economics and Tilburg Sustainability Center, Tilburg University, P.O. Box
90153, 5000 LE Tilburg, the Netherlands
d Department of Economics, University of Verona, Vicolo Campofiore 2, 37129, Verona, Italy
e Institute for Environmental Decisions, Professorship of Environmental Policy and Economics,
ETH Zurich, Universitatstrasse 22, 8092 Zurich, Switzerland
U.S. Environmental Protection Agency (EPA) www.EPA.gov
November 24, 2013
Keywords: household decision-making; collective household model; non-cooperative household model; unitary household model; Pareto efficiency; environmental health risks to parents and children; willingness to pay; matched sample of mothers and fathers

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