infonet-economy

This paper investigates the effect of changes in ambiguity on the value of statistical life (VSL) under the smooth ambiguity model developed by Klibano, Marinacci and Mukerji (2005). Changes in ambiguity over the mortality risk are expressed through the specific concept of stochastic dominance of order n defined by Ekern (1980). We provide sufficient conditions on the individual attitudes towards ambiguity such that both an ambiguity-averse and an ambiguity-seeking individual modify their VSL in the face of changes in ambiguity. These results have important implications for cost-benefit applications on the risk of human life.