The government conducts an analysis and finds few climate change benefits, but concludes that over the lifetime of the improved stoves, the probability of mortality due to acute asthma attacks declines by 1 in 1,000 (i e 0 001) These assumptions are the following Stoves last three years The government will have to pay $1000 per year to maintain the stoves The stoves are installed immediately and the cost of putting in the stoves is $7000, payable immediately The official annual discount rate of the Federal Government of Ethiopia is 5 year All costs and benefits, except the cost of putting in the stoves, accrue at the end of each year At the end of the three year period, the government will need to pay $500 to dispose of the worn out stoves If the health benefits are the only benefits, with these assumptions, what is the value of a statistical life that would have to hold for the project to pass a cost benefit test Please explain why and show all calculations

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Posted on Oct 06, 2024

The government conducts an analysis and finds few climate change benefits, but concludes that over the lifetime of the improved stoves, the probability of mortality

The government conducts an analysis and finds few climate change benefits, but concludes that over the lifetime of the improved stoves, the probability of mortality due to acute asthma attacks declines by 1 in 1,000 (i.e. 0.001).

These assumptions are the following:

Stoves last three years. The government will have to pay $1000 per year to maintain the stoves.
The stoves are installed immediately and the cost of putting in the stoves is $7000, payable immediately.

The official annual discount rate of the Federal Government of Ethiopia is 5%/year.
All costs and benefits, except the cost of putting in the stoves, accrue at the end of each year.
At the end of the three-year period, the government will need to pay $500 to dispose of the worn-out stoves.

If the health benefits are the only benefits, with these assumptions, what is the value of a statistical life that would have to hold for the project to pass a cost-benefit test? Please explain why and show all calculations.