3 country application of Alberini/Krupnick survey instrument – Methodology and Results

1. 3 country application of Alberini/Krupnick survey instrument – Methodology and Results Alistair Hunt and Anna Alberini University of Bath & University of Maryland For UK Defra Workshop 21.06.04

2. Theoretical basis for valuation of Mortality risk changes

3. Life Cycle model • at age j, max expected utility over remaining life time:

4. Definition of VSL • Ambiguous net effect of age j on VSLj

5. Study Features • Survey-based; UK, France, Italy • Directly values mortality risk changes • Uses framework methodology developed in N.America • Targets age group 40+ • Computer-based; self-administered; voice-over

6. Methodology Adaptation Testing comprised: • 10 one-to-one 1-2 hour in-depth interviews • 3 1-hour focus groups (8 participants) And aimed to clarify linguistic and comprehension issues whilst retaining comparability with N.American instrument • In UK, 330 people surveyed: recruited in 30-mile radius around Bath, SW England, using specialist recruitment company

7. UK Italy France No. 330 292 299 Locale of the Study Bath* Venice, Genoa, Milan and Turin Strasbourg Experimental Design Wave 1 Wave 1 Wave 1 and wave 2 Sample size and experiment design for the three-country study. • * • recruited within 35 Km of Bath. • Random digit dialing, in-street recruiting and snowballing • Eligible and contacted: 1350. Cooperative: 355. Finally attended: 330.

8. Structure of Survey Instrument • 5 sections • Personal information • Introduction to probability concepts • Causes of death; risk-mitigating behaviours and associated costs • WTP for risk reductions • Debriefing and socio-demographic questions

9. Introduction to probability concepts

14. Causes of death; risk-mitigating behaviours and associated costs

16. WTP for risk reductions • Dichotomous-choice approach with two follow-up questions and final open-ended question Respondents are asked to value: •  a 5 in 1000 risk reduction spread over the next 10 years, with effect immediately; • a 1 in 1000 risk reduction spread over the next 10 years, with effect immediately and; • a reduction of 5 in 1000 over the ten years from age 70.

17. Initial bid Bid if response to first payment question is no Bid if response to the first payment question is yes 45 20 100 100 45 325 325 100 475 475 325 650 Initial and follow-up bids in the UK study. (£)

24. Debriefing questions • understanding of idea of ‘chance’ • accept specific baseline? • specific product in mind? Yes – what kind of product? • Doubts about product? Yes – influence WTP? • Did you think you would suffer any side-effects? • Did you consider whether you could afford payments? • Think of other benefits? Yes - to yourself, others, for you living longer, improved health Yes – influence WTP? – raise/lower? Other people • On WTP 70 did you consider whether – would live to age 70? Or your health at age 70? • Household Income

26. Health Status data • Gathered from application of short-form (SF 36) questions within survey instrument • Series of questions relating to respondent’s current and historic physical and mental health status

28. Results of Survey application in EU

29. UK Italy France Age 58.03 57.04 55.35 Male 49.39% 48.63% 47.29% Income in EUR Mean Median 40,096 38,690 40,115 25,000 32,186 32,012 Education (years of schooling) 14.10 12.99 11.04 Descriptive Statistics of the Respondents’ Socio-demographics. Sample averages or percentages for selected variables

30. Health status of the respondent • Elicited using three sets of questions: • -- direct question: “Compared to other people your age, how would you rate your health?” (Excellent, very good, good, fair, poor) • -- direct questions about specific illnesses: “Has a health care professional ever diagnosed you to have…” (list of cardiovascular and respiratory illnesses) • -- Short Form 36 questions about general health and functionality

31. UK Italy France Rates own health as good or excellent relative to others same age 60.79 42.12 38.46 High blood pressure 28.48 33.33 21.07 Any chronic cardiovascular disease (CARDIO) 8.18 15.41 12.37 Any chronic respiratory illness (LUNGS) 15.45 12.67 18.73 Cancer (CANC) 6.36 6.85 6.35 High blood pressure or other cardiovascular illness, or chronic respiratory illness, or stroke (CHRONIC) 43.33 44.86 39.46 . Health status of the respondents Percentages of the sample with specified conditions

32. UK Italy France A. Wrong answer in the probability quiz 15.33 11.64 22.74 B. Confirms wrong answer in the probability quiz 0.91 2.74 4.01 C. Probability choice qn: - prefers person - higher risk - indifferent 14.29 6.97 11.99 10.96 10.37 22.41 D. Confirms wrong answer in probability choice question 1.52 3.08 1.34 A and C (FLAG1=1) 2.45 3.77 2.01 Percent of the sample who have various problems with risk comprehension Based on complete samples

33. Responses to starting bid values

34. Responses to immediate & future risk reductions

35. Risk reduction Sample size Percentage respondents with zero WTP 5 in 1000 over the next 10 years (immediate) 330 15.76 1 in 1000 over the next 10 years (immediate) 330 42.12 5 in 1000 between ages 70 and 80 187* 41.71 Percentage of respondents with WTP = 0 * = only respondents up to age 60 were asked to value the future risk reduction

36. Statistical Model of WTP

37. In Euro (s.e.) In £ (s.e.) Implied annual VSL Mean WTP 672 (86.02) 460 (60.27) € 1.344 million or £ 0.920 million Median WTP 354 (34.23) 242 (23.89) € 0.708 million or £ 0.484 million UK Study: Annual WTP FiguresImmediate 5 in 1000 Risk Reduction *cleaned data (FLAG1=1 deleted); n=322

38. Internal validity of the WTP responses

39. Coefficient St. error Intercept 5.8024** 0.386 Household income (thou. Euro) 0.0098** 0.0031 Age 50-59 0.0245 0.190 Age 60-69 0.2056 0.204 Age 70 or older -0.0748 0.256 Male -0.1842 0.142 Education 0.0072 0.024 Chronic resp or cardio illness 0.076 0.152 visited ER < 5 years – cardio/ resp 0.5944* 0.282 Has or had had cancer 0.4397 0.315 France dummy 0.8636** 0.214 Italy dummy 0.6705** 0.162 Weibull Shape parameter () 0.7400 0.044 Pooled data interval-data regressions for WTP.Immediate 5 in 1000 risk reduction. Respondents with FLAG=1 excluded. * = significant at the 5% level; ** = significant at the 1% level.

40. In Euro In £ Implied annual VSL Mean WTP 988 677 € 1.977 million or £ 1.354 million Median WTP 478 328 € 0.956 million or £ 0.656 million Pooled Data: Annual WTP FiguresImmediate 5 in 1000 Risk Reduction

41. Summary of results • UK sample is very small: no statistically significant association between WTP and age or health. • Pool data to increase sample size, but account for different cultural factors and sampling procedures through country dummies • Age is not significant associated with WTP, although the oldest respondents tend to have lower WTP • Of the health status dummies, dummy for hospital admission or ER visit in the last 5 years is strongly associated with WTP • Income is significantly associated with WTP • Gender and education not important

42. Relating WTP with predictions from epidemiological studies

43. coefficient Standard error Intercept 6.3047** 0.1049 France dummy 0.7788** 0.2041 Italy dummy 0.4400* 0.1892 Proportional risk reduction (=5 / baseline risk) 0.9851* 0.4862 Weibull shape parameter () 1.3809** 0.0816 Regressions of WTP on proportional risk reduction (5 in 1000 immediate risk reduction) (cleaned data)

44. Relating WTP with predictions from epidemiological studies • study values redns in risks  VSL but can couch in terms of  in remaining life expectancy (or loss/gain of days/months of life spread over the population) • Rabl (2001) derives  in remaining L.E. associated with 5 in 1000 risk change over next 10 years • averages 1.23 months (37 days) for our sample.

45. Derived VOLYs

46. Latency

47. 2 Step estimation of discount rate • Immediate 5 in 1000 Risk Reduction → predict WTP70,70 • Regress log WTPj,70 on log WTP70,70 (coefficient restricted to 1); log ρj,70 (coefficient restricted to 1) -Δ=j-70 → coefficient is δ

48. RESULTS • UK δ≈ 10% • France δ≈ 5% • Italy δ≈ 6%