Models for Estimating Discount Rates for Long-term Health Risks Using Labor Market Data.

This article utilizes evidence from job choices involving fatality risks to estimte individual discount rates for adverse health outcomes. The study compares the results from five distinct models for estimating discount rates from labor market data. The estimated discount rates range from 1 percent to 14 percent with confidence intervals that usually include financial market rates for the same period. This results, and consistent findings of significant compensating differentials for fatality risk, provide strong support for life-cycle models of individual rationality in the choice of job risks. Discounted value-of-life estimates are also developed and compared to the cross-section estimates that are more prevalent in the literature. Copyright 1990 by Kluwer Academic Publishers