The Value of a Statistical Life under Ambiguity Aversion

The paper shows that ambiguity aversion increases the value of a statistical life as soon as the marginal utility of wealth is higher if alive than dead. The intuition is that ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the “dead anyway” effect. A numerical example suggests, however, that ambiguity aversion can hardly justify the substantial “ambiguity premium” apparently embodied in environmental policy-making. The paper also shows that ambiguity aversion always decreases the marginal cost of individual self-protection effort but may also decrease its marginal benefit, so that the total effect is unclear.