3 country application of Alberini/Krupnick survey instrument

– Methodology and ResultsAlistair Hunt and Anna Alberini

University of Bath &

University of Maryland

For UK Defra Workshop 21.06.04

• Theoretical basis for valuation of Mortality risk changes

Life Cycle model

• at age j, max expected utility over remaining life time:

 

t

tj

jttj qcV )1()(max

Definition of VSL

• Ambiguous net effect of age j on VSLj

t

tjjt

tj

tj

jjj q

CU

CU

DdD

dWTPVSL )1(

)('

)(

1

1

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

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

Sample size and experiment design for the three-country study.

 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

 

*•recruited within 35 Km of Bath. •Random digit dialing, in-street recruiting and snowballing•Eligible and contacted: 1350. Cooperative: 355. Finally attended: 330.  

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

Introduction to probability concepts

Causes of death; risk-mitigating behaviours and associated costs

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.

Initial and follow-up bids in the UK study. (£)

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

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 healthYes – 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

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

• Results of Survey application in EU

Descriptive Statistics of the Respondents’ Socio-demographics. Sample averages or percentages for

selected variables  

  UK Italy France

Age 58.03 57.04 55.35

Male 49.39% 48.63% 47.29%

Income in EUR Mean Median

 

40,09638,690

 

40,11525,000

 

32,18632,012

Education (years of schooling)

14.10 12.99 11.04

 

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

. Health status of the respondents

Percentages of the sample with specified conditions

 

 

 

  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  

Percent of the sample who have various problems with risk comprehension

Based on complete samples

 

  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

 

11.9910.96

 

10.3722.41

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 

Responses to starting bid values

45100

325475

S1

71.1170.73

48.75

41.03

01020304050607080

Percentage Yes

Bid Amount (British Pounds)

UK Study: Percentage respondents willing to pay

5 in 1000 immediate risk reduction

Responses to immediate & future risk reductions

45100

325475

71.11 70.73

48.75

41.0336

45.45

19.5119.05

0

10

20

30

40

50

60

70

80

Percentage Yes

Bid Amount (British Pounds)

UK Study: Comparison of the % willing to pay for the immediate and future risk reductions

Percentage of respondents with WTP = 0  

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

* = only respondents up to age 60 were asked to value the future risk reduction

Statistical Model of WTP

D o u b l e - b o u n d e d m o d e l o f W T P

W e i b u l l d i s t r i b u t i o n o f W T P w i t h s c a l e p a r a m e t e r a n d s h a p e

L o g l i k e l i h o o d f u n c t i o n :

n

i

Ui

Li WTPWTP

L1

expexploglog

,

w h e r e W T P L a n d W T P U a r e t h e l o w e r a n d u p p e r b o u n d o f t h e i n t e r v a l a r o u n d t h e

r e s p o n d e n t ’ s W T P a m o u n t .

M e a n W T P =

1

1

, w h e r e i s t h e g a m m a f u n c t i o n

M e d i a n W T P i s e q u a l t o 1

)5.0ln( .

UK Study: Annual WTP Figures

Immediate 5 in 1000 Risk Reduction  

  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

 

*cleaned data (FLAG1=1 deleted); n=322

Internal validity of the WTP responses

C a n b e c h e c k e d b y l e t t i n g t h e s c a l e p a r a m e t e r o f t h e W e i b u l l b e

)exp( βx ii ,

w h e r e x i i s a 1 p v e c t o r o f r e g r e s s o r s , a n d i s a p 1 v e c t o r s o f c o e f f i c i e n t s .

I n o t h e r w o r d s , iiWTP βxlog , w h e r e f o l l o w s t h e t y p e I e x t r e m e v a l u e

d i s t r i b u t i o n w i t h s c a l e .

Pooled data interval-data regressions for WTP.Immediate 5 in 1000 risk reduction.

  Coefficient St. error

Intercept 5.8024** 

0.386Household income (thou. Euro) 0.0098**

 0.0031

Age 50-59 0.0245 

0.190Age 60-69 0.2056

 0.204

Age 70 or older -0.0748 

0.256Male -0.1842

 0.142

Education 0.0072 

0.024Chronic resp or cardio illness 0.076

 0.152

visited ER < 5 years – cardio/ resp 0.5944* 

0.282Has or had had cancer 0.4397

 0.315

France dummy 0.8636** 

0.214Italy dummy 0.6705**

 0.162

Weibull Shape parameter () 0.7400 

0.044Respondents with FLAG=1 excluded. * = significant at the 5% level; ** = significant at the 1% level. 

Pooled Data: Annual WTP FiguresImmediate 5 in 1000 Risk Reduction  

 

 

  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

 

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

Relating WTP with predictions from epidemiological studies

Regressions of WTP on proportional risk reduction (5 in 1000 immediate risk reduction)

(cleaned data) 

  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

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.

Derived VOLYs 

 

UK EU (Pooled) Annual WTP Median Mean

242.22 460.20

328 677

VOLY Median Mean

22,080 41,975

30,203 64,788

Latency

qeWTPWTP jjjjjj

,,,

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

 

RESULTS

• UK δ≈ 10%

• France δ≈ 5%

• Italy δ≈ 6%