Morbidity and Mortality: How Do We Value the Risk of Death and Illness? Session 2

This paper tests an equilibrium condition from a model that incorporates: (1) altruism of parents toward their young children and (2) household production of latent health risks. The model demonstrates that an altruistic parent’s marginal rate of substitution between an environmental health risk to herself and to her child is equal to the ratio of marginal risk reduction costs. Econometric estimates support this prediction based on data from a stated preference study involving 488 parents of children aged 3-12 years. This outcome implies that parents reallocate family resources to at least partly offset the effectiveness of public programs that aim to reduce their children’s environmental risks.