[pp.11-20]

A Factor Analysis Approach toward the Effects of Risk Perceptions on the Value of a Statistical Life: Air Pollution-Asso

Naoko KAIDA, Hiroaki SHIRAKAWA and Shunji MATSUOKA （Nagoya University / Waseda University）

Abstract:
It is well known that people's perceptions of risks affect their preferences for risk aversion. A number of studies have been conducted on valuing risk reductions and adjusting the values of risks in this regard. The present study aimed to elicit the effect of risk perceptions on the economic valuation of mortality risk reduction by employing factor analysis approach to summarize conventional risk perception variables into risk factors. Contingent valuation survey data (Hiroshima, Japan) on air pollution-associated risk and traffic accident risk were used for the analysis. The mean values of a statistical life (VSLs) calculated from the estimated willingness to pay for a marginal risk reduction were JPY259-401 million (US$2.1-3.2 million) for air pollution-associated risk and JPY419-635 million (US$3.4-5.1 million) for traffic accident risk. A factor analysis on risk perceptions extracted three risk factors—responsibility, dread, and knowledge. Using factor scores obtained from factor analysis, the present study found that the three factors influenced the respondents’ valuations of reducing their traffic accident risk in an upward direction and air pollution-associated risk in a downward one. This result suggests that VSL transfer and adjustment using conventional risk characteristics should be carefully re-examined. Instead, the factor analysis approach that was demonstrated in the present study would contribute to consistent understanding of risk perceptions and valuation of risk reductions.

Key Word:
risk perception, factor analysis, value of a statistical life, contingent valuation, environmental health risk

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