In order to see how the estimation result changes with the level of risk reduction, we conduct simulations based on the modeling results of models 4 and 6. Presented in Table 10 are the simulation results of cancer morbidity risk reduction<sup>14</sup> . Individual characteristics are fixed at their sample average values. The simulations show that the average values of risk reduction are always higher than the marginal values. At the risk reduction level of 1/1000, the WTP model gives an average value of 11.4 times the marginal value, and the log WTP model gives an average value of 5.3 times the marginal value. The marginal values do not change much when the risk reduction is small. However, the average value is decreasing dramatically along with the increase in risk reduction. This is consistent with the empirical findings that higher VSL estimates are found when lower risk reduction levels are proposed in contingent valuation studies.

# **10. Discussion and Conclusion**

In this paper, we present a study on the value of statistical life (VSL) in China which uses data on cancer morbidity and mortality observed in China and information on willingness-to-pay (WTP) for cancer risk prevention that was collected in a contingent valuation study conducted in three areas of China in 2000. The cancer risk information is age, sex and region specific, which can be mapped with the respondents’ characteristics to produce an estimate of cancer risk for each of the respondents. WTP for cancer risk reduction is elicited with a hypothetical cancer vaccine that can prevent a person from getting cancer for one year.

With the conventional CV approach, the mean value of individual VSLs based on the cancer mortality data is estimated to be 1.97 million yuan, or 150 times of average household annual income, which is 13230 yuan for our sample. Because the WTP in the study is more than for avoiding death, the value can overestimate the VSL. This estimation can also be significantly affected by a small group of individuals who value lives extremely high. This mean value is reduced to about 800,000 yuan, or 60 times of the average household annual income, when it is calculated by the sample mean WTP divided by the sample mean cancer mortality reduction (759*10000/9.5). This is equivalent to the total WTP divided by the total lives saved, which is more relevant to policy analyses. However, the former approach is more compatible with the VSL definition, which is based on an individual’s WTP for risk reduction.

VSL can also be projected with the empirically estimated WTP models by substituting the mean values of the characteristic variables into the models. The average value approach gives a VSL estimate of 795,000 yuan, or 60 times of the average household annual income<sup>15</sup> . The marginal value approach gives a VSL of 73,000 yuan, which is about 10 times lower than the estimate obtained with the average value approach. As the marginal value approach is a theoretically correct approach, this sharp difference provides a strong challenge to the validity of the average value approach, which has been used widely in previous contingent valuation studies of VSL. Also note that the WTP function of risk reduction in this study is estimated with cross-individual data which is based on the variations in WTP and level of risk reduction between individuals. It

> 14 As discussed before, the modeling results with cancer mortality are poorer than those with cancer mortality. But the simulation conclusion is the same for both the mortality model and the morbidity model. 15 See table 9-2, model 4.

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