Document Type

Working Paper

Publication Date


Working Paper Number

WP #13008, March 2013


We document various limitations of the expected utility model for the study of health and longevity. The model assumes individuals are indifferent between early and late resolution of uncertainty. This assumption gives rise to predictions regarding the economic value of life that are inconsistent with relevant evidence. For example, poor individuals would price life below the present value of foregone income or even negatively. We show that a non-expected utility model disentangling intertemporal substitution from risk aversion can overcome these limitations. We illustrate the quantitative implications of our model for the economic value of life across countries and time.

JEL Classification

I15, J17

File Format



41 pages

Included in

Economics Commons