ENTREVISTA NO ESTRUCTURADA

There lacks consensus on the most appropriate approach for computing road crash costs (Alfaro et al, 1994; Elvik, 2000). Understanding how road crash costs have been categorised can assist in the determining which approach to take. The valuation of reductions in road deaths can be made by the individuals who could experience road death or by the society as a

whole (Evans, 2001). From an individual perspective, the costs of a road death include

material and immaterial costs. Material costs consist of the individual consumption that could have occurred in the life years lost. Immaterial costs have no market price and represent the loss of joy of life and the value of pain, sorrow and distress of the casualties and their

relations (Wijnen et al, 2009). The willingness-to-pay (WTP) approach can account for these two costs.

However, for society as a whole the value of a road death is also determined by gross

production loss and medical costs (e.g. Alfaro et al, 1994; Persson & Odegaard, 1995), which are not borne by the individuals directly. Gross production loss, which includes the individual consumption loss, can be estimated by the human capital approach (HCA). Values derived from the HCA are often found lower than the values derived from the WTP approach because HCA is restricted to the economic costs and does not include human costs. Both approaches have pros and cons as summarised in Table 5.1.

The HCA is based on the principle that the benefit of avoiding a premature death is given by the present value of the income flow the economy could lose in such an event (Ashenfelter, 2006). It estimates the life-time earning foregone as the result of a productivity-reducing disability and death. Some argue that the HCA tends to overestimate the true productivity losses to the economy because the loss of an individual worker from the workforce only creates transitory productivity loss (Koopmanschap and van Ineveld, 1992; Koopmanschap et al, 1995). It is argued that another worker can replace the injured worker eventually.

The WTP approach seeks individuals’ valuation of the consequences of an intervention in terms of the amount of money that individuals are willing to pay for reducing the risk of their premature death or of injury (Gafni 1991; Hensher et al, 2010). It is implemented to elicit individual preferences, predominantly through the application of contingent valuation (CV) method. CV method uses surveys to elicit how much individuals would pay for the product. Alternatively revealed preference (RP) method uses data on actual purchasing behaviour of individuals for risk reducing products (e.g. protective clothing). Pros and cons of these methods are summarised in Table 5.2. Other than the WTP approach, court-based

compensation awards have also been used as an alternative measure (BTE, 2000). All these methods aim to estimate a monetised measure of not only income loss but also a reduction in the enjoyment of life that arises due to disability or death. The HCA misses the latter source because the same level of income does not provide the same level of satisfaction as it would have been in the absence of the disability.

Chapter 5 – Options for cost benefit analysis of increased usage of protective clothing 64 Table 5.1 The pros and cons of the willingness-to-pay (WTP) approach and the human capital approach (HCA)

WTP approach (ex-ante value) HCA (ex-post value) Pros Reflect people’s preferences (consistent

with welfare economics)

Reflect one’s immaterial value of life (quality, pain, grief, suffering of family and friends)

Transparent, verifiable value

Provides valid lower bound estimate

Cons Empirical difficulties It calculates earning capacity loss, which means higher values are assigned to working age people than younger and older people. Hence the value of younger and older people’s lives are undervalued. Ignore immaterial costs

Sensitive to discount rate chosen

Table 5.2 The pros and cons of the two methods used to elicit WTP value: revealed preference (RP) method and contingent valuation (CV) method

RP method CV method

Pros Based on actual behaviour The survey can incorporate a descriptor that describes risks and risk reduction level, the pros and cons of the product to be valued.

Cons Limited applicability in road safety (e.g. airbags cannot be purchased separately because it is attached to the car; seatbelts are obligatory).

Unrealistic assumption that people correctly assess the risks that they take and the risk reduction obtained from the purchase when paying for the product

The values are obtained in hypothetical scenarios.

The values are not considered under budget constraints. Hence it may not be feasible to allocate large resources for marginal changes in safety.

It only measures the preferences of affected individuals only.

The theoretical superiority of the WTP approach lies in the value placed on the immaterial aspect of road crashes, while the criticism of WTP approach lies in the practical/empirical difficulties in assigning valid and reliable values of immaterial costs due to the lack of actual market transactions to verify them. Value of road death prevention is variable with the

methods used, respondents’ income, their initial risk and age, individual or group risk, degree of voluntary acceptance of or familiarity with the risk, the road safety intervention being public or private. Hence a constant value cannot be obtained from the literature for Australia. WTP values tend to be more reliable when it is context specific because WTP is a measure of preference of specific individuals or groups who are affected by certain proposals. WTP value should be determined for each road safety measure and its target group.

The WTP approach is particularly suited to estimate the safety value of protective clothing. This is because there are several unique features of protective clothing that make it less/more valued as a safety product and it only affects specific road users (i.e. motorcycle riders). CV surveys can be designed in such a way to maximize validity and reliability of the WTP values. For example, in the descriptor of the CV survey the limitations of protective clothing such as heat stress and discomfort (de Rome, 2006) could be clearly identified at the same time as the safety benefits of protective clothing. This would elicit the value of protective clothing with all its apparent pros and cons taken into account. That is, the costs borne by those who are affected by protective clothing is already taken into account in the value estimation.