Household Decision Making and Valuation of Environmental Health Risks to Parents and Their Children

Abstract

AbstractThis paper empirically discriminates between household decision-making models for estimating parents’ willingness to pay for health risk reductions for their children and for themselves. Models are tested using data from a stated preference survey involving 432 matched pairs of married parents. Analysis builds on a collective model of 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. Thus, for a given proportionate reduction in health risk, (1) parents are willing to pay equal amounts at the margin to protect themselves and the child and (2) parents’ choices for their children are based on household valuations, rather than individual valuations. The marginal willingness to pay of mothers and fathers for health risk protection appears insensitive to shifts in their relative contributions to the household budget.