The impact of subjective risk perception of mortality on willingness to pay for its reduction (a case study of air pollution)

This study develops econometrically sound tools to assess the influence of subjective risk perception of mortality from air pollution on individuals’ willingness to pay (WTP) for its reduction. The research is motivated by the crucial role of WTP estimation in determining the Value of Statistical Life (VSL), a metric extensively utilized in international regulatory impact assessments. To address potential endogeneity issues, the instrumental variable (IV) method is employed. According to the results obtained, ceteris paribus, an increase of one unit in an individual’s subjective assessment of their own mortality risk due to air pollution relative to the perceived risk for the average individual, leads to an increase in WTP for risk reduction of at least 349.5 rubles. The value of the corresponding coefficient in the baseline regressions is lower by at least three times. The obtained results can be useful in the development and validation of questionnaires used in the framework of government programs, where the collected data can be used to estimate the cost of statistical life and justify the socio-economic consequences of making or not making management decisions in the spheres of ecology, health care.