Sunday, December 27, 2015

Valuation of small and multiple health risks: A critical analysis of SP [Stated Preference] data applied to food and water safety

This study elicits individual risk preferences in the context of an infectious disease using choice experiments. A main objective is to examine scope sensitivity using a novel approach. Our results suggest that the value of a mortality risk reduction (VSL) is highly sensitive to the survey design. Our results cast doubt on the standard scope sensitivity tests in choice experiments, but also on the validity and reliability of VSL estimates based on stated-preference studies in general. This is important due to the large empirical literature on non-market evaluation and the elicited values’ central role in policy making.
According to the December 2013 working paper available free of charge at results from a split-sample design suggest that the value of the mortality risk reduction, defined as the value of a statistical life, is SEK 3 177 (USD 483 million) and SEK 50 million (USD 8 million), respectively, in our two sub-samples... whereas the results in the latent-class model were SEK 1 555 million (USD 237 million) and SEK 10 million (USD 1.5 million) in sub-sample A and B (Class 4). Hence, with a 100 times smaller risk reduction in sub-sample A the VSL is 60 to 150 times larger. In a recent meta-analysis containing 850 estimates VSL was shown to vary between USD 4 450 and USD 197 million with a weighted mean VSL at USD 7.4 million (Lindhjelm, Navrud et al. 2011). Our results from sub-sample A are at the very high end of the range. Our results from sub-sample B fall very well within the range of previous published estimates, and are close to the reported weighted mean in the meta-analysis. Moreover, the estimates are in line with previous published estimates of VSL related to road safety in Sweden that in a recent review were shown to vary between USD 0.7 and 8.3 million with a mean and median equal to USD 2.9 and 2 million (Hultkrantz and Svensson 2012). This finding is of interest since the mortality risk level in sub-sample B was based on the risk levels for road-mortality risk in Sweden.
In order to address the research questions as set out in the Introduction we administered a CE survey. In the experiment respondents were asked to choose between different public policies that were described to reduce campylobacter-related mortality and morbidity risks. The policies differed across choice sets with respect to the size of mortality and morbidity risk reductions, the source of the disease being targeted (food- or water-borne), when the policy would start to have an effect, and the monetary cost of the policy.  Preferences and WTP estimates for food and water safety are implicitly derived from the respondents’ choices in the CE, which answers our first research question. To address the second research question we test whether respondents can deal with two health variables in CE by examining WTP for the mortality and morbidity attribute, respectively. In addressing the third research question of scope sensitivity we created a split-sample design with two sub-samples that were identical in all aspects with the exception of the size of the mortality risk reduction. We refer to the two sub-samples as sub-sample A (smaller risk reduction) and sub-sample B (larger risk reduction), respectively.
by Henrik Andersson 1, Arne Risa Hole 2, Mikael Svensson 3 & 4 
1. Toulouse School of Economics (LERNA, UT1C, CNRS), 21 Allée de Brienne, 31015 Toulouse Cedex 6, France
2. University of Sheffield, United Kingdom
3. Karlstad University, Sweden
4. Health Metrics, The Sahlgrenska Academy, University of Gothenburg, Sweden
Journal of Environmental Economics and Management via Elsevier Science Direct
Volume 75; January, 2016; Pages 41–53; Available online 10 November 2015
Keywords: Choice experiments; Morbidity risk; Mortality risk; Scope sensitivity; Time preferences; Willingness to pay

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