A Consistent Framework for Valuing Latent Morbidity and Mortality Risks to Adults and ChildrenEPA Grant Number: R831592
Title: A Consistent Framework for Valuing Latent Morbidity and Mortality Risks to Adults and Children
Investigators: Dickie, Mark , Gerking, Shelby
Institution: University of Central Florida
EPA Project Officer: Hahn, Intaek
Project Period: November 1, 2004 through October 31, 2006 (Extended to October 31, 2007)
Project Amount: $244,519
RFA: Valuation for Environmental Policy (2003) RFA Text | Recipients Lists
Research Category: Economics and Decision Sciences
Proposed research would develop and implement a theoretically correct framework for estimating willingness to pay to reduce latent morbidity and mortality risks to parents and children that may be the outcome of exposure to environmental hazards. Research emphasizes valuation of morbidity risk reduction for children because, as indicated in the solicitation, additional information in this area will lead to more accurate estimation of health benefits for policy purposes. Mortality risk is treated because the framework developed views death as a possible consequence of illness. Morbidity and mortality values are obtained for adults (parents) because they are useful in making comparisons to results obtained for children. Latency is emphasized because environmental exposures frequently result in measurable changes in human health only after a time lag and because insufficient information is currently available about how people discount health risks, particularly for children.
Consistent treatment of morbidity and mortality risk rests on splitting unconditional death risk into the product of two components: (1) the risk of becoming ill and (2) the conditional risk of death given illness. These components would be incorporated into an intertemporal expected utility model in which parents may take precautions to reduce risks both for themselves and for their children. Advantages of the approach include: (1) for a given time pattern of health risks, morbidity values can be calculated while holding conditional mortality risk constant, (2) the value of a statistical life for children can be calculated independently from the value of a statistical life for adults (parents), (3) for perhaps the first time, the contribution of the value of reduced morbidity to the value of a statistical life can be computed for both adults and children, and (4) issues pertaining to latency and discounting of health risks can be confronted by comparing values of near term and more delayed risk reductions. Also, the model can be implemented using an experimental design in which health risks are varied parametrically. This important aspect permits benefits of latent risk reduction to be estimated using simple econometric methods that avoid a number of complications faced in previous studies.
The approach would be implemented in a study of latent leukemia risks faced by parents and children. Leukemia is the most common cancer in children, accounting for about 25 percent of cases (Ries et al. 2002), is a common cancer in adults as well, and has been linked to certain types of environmental exposure. Data on leukemia risks perceived by parents, willingness to pay for treatments to reduce these risks, and other information would be collected from a survey of parents with children living at home. The survey would be administered through a subcontract with Knowledge Networks, a corporation that has recruited the first online research panel designed to represent the U.S. population. Willingness-to-pay elicitation methods and associated estimators with desirable statistical properties would be employed.
Key results expected to be obtained from the proposed research include: (1) for a given time pattern of health risks, morbidity values can be calculated while holding conditional mortality risk constant; (2) the value of reducing morbidity or mortality risks for children can be calculated independently from the value for adults; (3) the contribution of the value of reduced morbidity to the value of a statistical life can be computed for both adults and children; and (4) issues of latency and discounting can be examined by comparing values of near-term and more delayed risk reductions. The experimental design permits benefits of latent risk reduction to be estimated using simple econometric methods that avoid several complications faced in previous studies. In addition, separate valuation of the risk of contracting cancer and the conditional risk of dying from it strengthens links between economic analysis and risk assessment, because risk assessments for carcinogens provide estimates of probabilities of developing cancer and on changes in probability with changes in dose.