NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Daniel Bauer

University of Wisconsin-Madison

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Wisconsin-Madison

NBER Working Papers and Publications

September 2018Mortality Risk, Insurance, and the Value of Life
with Darius Lakdawalla, Julian Reif: w25055
We develop and apply a generalized framework for valuing health and longevity improvements that departs from conventional assumptions of full annuitization and deterministic mortality. In contrast to conventional theory, we find a given mortality improvement may be worth more, not less, to patients facing shorter lives. Using real-world data, we calculate that severe illness can increase the value of statistical life by over $1 million. This result reconciles an anomaly in the research on preferences for life-extension. Moreover, our framework can value the prevention of mortality and of illness. We calculate that treating illness is up to an order of magnitude more valuable to consumers than prevention, even when both extend life equally. This asymmetry helps explain low observed investme...
 
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