the value of reduced risk of death) will, in general, understate the economic value of reduced risk of death (Freeman 1993).

Avoided morbidity is also valued by the amount a person will pay to avoid a particular illness. For minor illnesses (such as respiratory infections) the correct valuation concept is what an individual would pay to avoid the illness with certainty.'<sup>3</sup> This should capture the value of the pain and suffering avoided, as well as the value of time lost due to illness (both leisure and work time) and the costs of medical treatment. In cases where some of these costs are not bome by the individual, and are therefore not reflected in his WTP, the value of the avoided costs must be added to WTP to measure the social benefits of reduced morbidity. It is often the case that the costs of medical treatment (hereafter referred to as COI) and time lost from work (Productivity Loss) are not borne by the sick person. We therefore measure the value of avoided mortality by WTP to avoid lost leisure time and the discomfort associated with illness, but add to this the value of lost productivity and the costs of medical treatment. As in the case of mortality, it can be argued that the avoided value of lost productivity and medical costs alone will understate the economic value of reduced morbidity (Freeman 1993).

Estimates of WTP to reduce risk of death and estimates of WTP to avoid illness unfortunately do not exist for Mexico. It is therefore necessary to transfer to Mexico estimates from countries where WTP studies have been conducted. When extrapolating estimates of WTP from one country to another, adjustments must be made for the effect of income on WTP. In general, WTP (both for mortality and for morbidity) should increase with income. In transferring estimates from country A to Mexico the formula used is

# WTPMEXICO = WTPA [IncomeMExlco/IncomeA]

where c represents the income elasticity of WTP-the percentage change in WTP corresponding to a one percent change in income.

It should be acknowledged that there is considerable uncertainty regarding estimates of the income elasticity of WTP, especially for mortality, as well as uncertainty regarding the estimates of WTP themselves. We handle this uncertainty in two ways. First, we use two estimates of the income elasticity of WTP-1.0, and 0.4. Holding WTPA constant, the 0.4 elasticity results in a larger WTP estimate for Mexico than the 1.0 elasticity. Indeed, when WTP estimates from the United States are transferred to Mexico using Purchasing-Power-Parityadjusted income, an income elasticity of 0.4 implies a WTP for Mexico that is about the size of WTP in the US. We therefore view WTP estimates based on an income elasticity of 0.4 as upper bound estimates, and estimates based on an income elasticity of 1.0 as central case estimates.

Second, to handle uncertainty about the size of WTP, especially WTP for reduced mortality, we also present conservative, lower bound estimates of the value of mortality and morbidity. Specifically, we measure the value of avoided premature mortality using the Human Capital/foregone eamings approach, as well as by transferring estimates of WTP to reduce

> **13** In the case of rarer events, such as heart attack or stroke, the correct valuation concept is what a person would pay to reduce his risk of the illness occurring.

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