Valuing Life over the Life Cycle
The (unobserved) economic valuation of a human life pays a central role in safety, public health, legal, as well as quality vs quantity of life debates. Its shadow value must be inferred from the explicit or implicit willingness to pay (WTP) or to accept compensation (WTA) for beneficial and detrimental changes in longevity. Both evolve over the life cycle (LC) through (i) accumulation and decumulation phases in financial, human and life capital, (ii) age-increasing morbidity and mortality risks, and (iii) differing mixes between market (e.g. consumption) and non-market (e.g. leisure) activities. The objective of this paper is to characterize these age-dependent sources of variation in life values. I solve and calibrate a LC model of consumption, leisure and health investment choices, featuring generalized recursive preferences and age-dependent wages, exposure to death and sickness risks. A calibration exercise reproduces observed labour, wealth and health patterns and yields plausible WTP/WTA. It reveals how the willingness to pay/accept compensation for beneficial and detrimental changes are altered by ageing, and what are the implications for life valuations.