The value of life

Arayssi, Mahmoud; Khoury, Sarkis Joseph; Mardini, Rania Uwaydah

The value of life

Arayssi, Mahmoud; Khoury, Sarkis Joseph; Mardini, Rania Uwaydah

URI: http://hdl.handle.net/10725/7395

URL: https://www.degruyter.com/view/j/jbvela.2006.1.1/jbvela.2006.1.1.1004/jbvela.2006.1.1.1004.xml

DOI: https://doi.org/10.2202/1932-9156.1004

Date: 2018-04-17

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Abstract:

This paper develops a labor-based model where a worker chooses between not only work and leisure, as the traditional labor models have argued, but rather between labor, leisure and the purchase of insurance. The model allows the insurance buyer to determine the amount of insurance he is willing to work for and purchase while maximizing utility and derives the shadow price of risk, thus the value of life. The model is applied to quadratic, logarithmic, and exponential utility functions. Results can help insurance companies determine the cost of insurance associated with a specific job and related risk.

Citation:

Arayssi, M., Khoury, S. J., & Mardini, R. U. (2006). The Value of Life: A New Labor Theory-Based Model. Journal of Business Valuation and Economic Loss Analysis, 1(1).