Valuation of Health Impacts

Disability Adjusted Life Years (DALYs) are used previously to quantify the stream of benefits in terms of human health impacts. In order to convert this value into economic terms, an economic value of a DALY must be determined.

Value of a DALY

A reliable estimate of a Value of a Statistical Life (VSL) can be retrieved from a work by Mrozek & Taylor (2002), in which they reviewed more than 40 studies providing over 200 Value of a Statistical Life  estimates. The key finding was that VSL estimates range from approximately US$ 1.5 million to US$ 2.5 million (in 1998). Using the mid-point of this range, an average VSL of US$ 2 million in 1998 can be taken as reference. This figure is escalated to reflect price inflation between 1998 and 2008 , and translates into a VSL in 2008 of US$ 2.64 million.

To obtain the value of a DALY, the Value of a Statistical Life  must be divided by the number of DALY corresponding to a premature death. This number varies in function of the age at which death occurs, which itself depends on the nature of the risk considered (here, POPs-related health impacts). However, no information is available about age-specific mortality caused by exposure to POPs; and, there is no basis to assume that POP-related diseases would impact a given age class more than another . As a result, the average population is assumed to stand an average loss of 22 DALYs per premature death according to the age-distribution of DALYs.

The value of a DALY in the US, in 2008, is estimated to be US$ 120,000 (2.64 million/22).

This estimate needed to be adjusted to reflect the present day situation in the local country. In order to accomplish this, the per-capita gross national product indicator is used to translate the value of a DALY in the US to the local country.

Valuing benefits in terms of health impacts

The benefits previously calculated will be measured in terms of health impacts by dividing their value in dollars by the value of a localized DALY. This benefit also needs to be estimated in relative terms; that is, expressed as a percentage reduction in the total DALYs at the site.

 

References:

Mrozek, J. and Taylor, L. (2002). What Determines the Value of Life? A Meta Analysis. Journal of Policy Analysis and Management. Vol21 (2): 253-270.

The value of a DALY in the US, in 2008, is estimated to be US$ 120,000
Source: Peter Hellberg
Hatfield Consultants The World Bank funded by the Canadian POPs Trust Fund through the      
Canadian International Development Agency
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