Paper Number: 2013-06

Document Date: 12/2013

Author(s): Wiktor Adamowicz, Mark Dickie, Shelby Gerking, Marcella Veronesi, and David Zinner

Subject Area(s): Economic Damages/Benefits; Valuation; Children's Health

JEL Classification:  Household Behavior and Family Economics: Household Production and Intrahousehold Allocation; Welfare Economics: Allocative Efficiency; Cost–Benefit Analysis; Health: Health Behavior; Welfare; Well-Being; and Poverty: Government Policy; Provision and Effects of Welfare Programs; Demographic Economics: Fertility; Family Planning; Child Care; Children; Youth; Environmental Economics: Valuation of Environmental Economics

Keywords: household decision-making; collective household model; non-cooperative household model; unitary household model; Pareto efficiency; environmental health risks to parents and children; willingness to pay; matched sample of mothers and fathers

Abstract: This paper empirically discriminates between alternative household decision-making models for estimating parents’ willingness to pay for health risk reductions for their children as well as for themselves. Models are tested using data pertaining to heart disease from a stated preference survey involving 432 matched pairs of parents married to one another. Analysis is based on a collective model of parental resource allocation that incorporates household production of perceived health risks and allows for differences in preferences and risk perceptions between parents. Results are consistent with Pareto efficiency within the household, which implies that (1) for a given proportionate reduction in health risk, parents are willing to pay the same amount of money at the margin to protect themselves and the child; and (2) parents’ choices about proportionate health risk reductions for their children are based on household valuations, rather than their own individual valuations. Results also suggest that the marginal willingness to pay of mothers and fathers for health risk protection is sensitive to a shift in intra-household decision-making power between parents.

This paper is part of the Environmental Economics Working Paper Series.

• Household Decision-Making and Valuation of Environmental Health Risks to Parents and their Children (PDF)(62 pp, 882 K, 11/24/2013)
• Appendix C. Text Version Of Survey Used to Collect Data for “Pareto Efficiency in Intra-household Resource Allocation and Risks to Children’s Health" (PDF)(47 pp, 472 K, 08/2013)