Willingness to Pay for a Reduction in Road Mortality Risk: Evidence from Sweden

University dissertation from Dept. of Economics, Lund University

Abstract: The thesis consists of an introductory chapter, followed by three chapters in which willingness to pay (WTP) for a reduction in car- and road-mortality risk is estimated using both revealed- and stated-preference methods. In chapter 2 the hedonic regression technique is used to estimate the value of traffic safety, using information from the Swedish market for automobiles. The results from the study show that the market price of an automobile is negatively correlated with its inherent risk level, i.e. Swedish car consumers pay a safety premium for safer cars. In comparison to previous Swedish stated-preference studies, this study reveals a lower willingness to pay for additional car safety, which might be a result of the interaction between government interventions and individual self-insurance and self-protection. Chapter 3, using a pooled data set from two Swedish marginal WTP studies, estimates a marginal WTP function for a road-mortality risk reduction. Observed marginal WTP from the Swedish car market is used and found to be positively correlated with the baseline risk of the cars. Among owner attributes, both income and background risk have the expected sings, i.e. income is found to increase marginal WTP, whereas background risk reduces marginal WTP. However, only background risk is found to have a significant effect on marginal WTP. Also, when comparing the estimated monetary value of a non-marginal risk reduction by using the marginal WTP function with an estimate based on marginal WTP, we find that the estimates are different but that the difference is modest. This is in line with expectations. In chapter 4 we examine how WTP for a reduction in road mortality risk varies with different individual characteristics and how subjective mortality-risk estimates differ from objective (statistical) mortality-risk values. Using data from a Swedish contingent valuation study, we find some support that WTP declines with age and background risk, but we find no correlation between health status and WTP. Further, we find that respondents underassess their own mortality risks, both road- and total-mortality risks, compared to the objective risk measures for Sweden at the time of the survey.

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