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Private and public WTP for safety: a validity test
Toulouse School of Economics, France.
Toulouse School of Economics, France.
Institute of Transport Economics (TØI), Norway.
2018 (English)Conference paper, Published paper (Refereed)
Abstract [en]

In order to mitigate adverse health effects policy makers can, broadly speaking, choose between private and public safety measures. For instance, whereas legislation on seat-belt usage can be considered a private good for which the individual bares the costs and benefits, public investments to improve the standard of a road that increases safety will benefit all who travels on that road.

Since safety comes at a cost, policies that increase safety need to be evaluated. In order to secure an efficient resource allocation, policy makers often rely on benefit-cost analysis (BCA). To facilitate the BCA, it is common to use a common metric in form of monetary values for both the costs and the benefits. However, many of the effects induced by safety policies do not have easily obtainable monetary values and for those effects policy makers turn to non-market evaluation methods, such as revealed (RP) and stated preference (SP) methods.

Since SP methods do not rely on the existence of actual market data they are more flexible than RP methods. However, SP methods are based on hypothetical scenarios and it has been found that they often are flawed by several biases such as hypothetical and strategic bias, as well as scale insensitivity. Therefore, the hypothetical setting necessitates tests of construct validity, i.e. tests of whether the results are in accordance with expectations, based on economic theory and/or empirical findings.

One area where SP methods have been used, is to estimate willingness to pay (WTP) for public safety measures, for which tradeoffs based on actual decisions are usually not available. If individual WTP for private and public safety measures is identical, there would be no need to derive them separately. Since WTP depends on the context and the affected population there is a no a priori ground to believe that they are identical, though. The empirical evidence also suggests that private and public WTP differ. Therefore, policy makers may need different values when evaluating private and public safety policies.

The aim of this study is to describe a validity test for private and public WTP for safety. We use a framework with a mortality risk and the motive for this study is findings on differences in WTP for private and public road safety.  It is a well-established fact that SP studies that estimate WTP to reduce mortality risk, with few exceptions, fail the test of strong scale, an important test of the validity of the WTP estimates. The validity of WTP estimates for public and private safety measures has, to the best knowledge of the authors, so far not formally been tested, however. The importance of such a test is supported by the empirical estimates of public and private WTP for road safety, since these estimates would fail the test.

Place, publisher, year, edition, pages
Linköping: Statens väg- och transportforskningsinstitut, 2018.
Research subject
X RSXC
Identifiers
URN: urn:nbn:se:vti:diva-12900OAI: oai:DiVA.org:vti-12900DiVA, id: diva2:1203911
Conference
18th International Conference Road Safety on Five Continents (RS5C 2018), Jeju Island, South Korea, May 16-18, 2018
Available from: 2018-05-16 Created: 2018-05-04 Last updated: 2018-05-15Bibliographically approved

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Citation style
  • apa
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Output format
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