Current research

Hugonnier, Julien, Florian Pelgrin and Pascal St-Amour (2018), “Valuing Life as an Asset, as a Statistic, and at Gunpoint” , Faculty of Business and Economics (HEC), University of Lausanne, (paper).

  • Abstract: The Human Capital (HK) and Statistical Life Values (VSL) differ sharply in their empirical pricing of a human life and lack a common theoretical background to justify these differences. We first contribute to the theory and measurement of life value by providing a unified framework to formally define and relate the Hicksian willingness to pay (WTP) to avoid changes in death risks, the HK and the VSL. Second, we use this setting to introduce an alternative life value calculated at Gunpoint (GPV), i.e. the WTP to avoid certain, instantaneous death. Third, we associate a flexible human capital model to the common framework to characterize the WTP and the three life valuations in closed-form. Fourth, our structural estimates of these solutions yield mean life values of 8.35 M$ (VSL), 421 K$ (HK) and 447 K$ (GPV). We confirm that the strong curvature of the WTP and the linear projection hypothesis of the VSL explain why the latter is much larger than other values.

Hugonnier, Julien, Florian Pelgrin and Pascal St-Amour (2018), “Closing Down the Shop: Optimal Health and Wealth Dynamics near the End of Life”, Faculty of Business and Economics (HEC), University of Lausanne, (paper).

  • Abstract: Health declines, and mortality risk increases rapidly near the end of life. Curative care expenses stagnate, while long-term care spending increases, accelerating the fall in wealth. Standard explanations emphasize inevitable health deteriorations associated with aging. We propose a closing down the shop alternative where agents’ decisions affect their health, and the timing of death. Despite strictly preferring to live, agents optimally deplete their health and wealth statuses towards levels associated with high death risk and indifference between life and death. Using HRS data for agents over 65, a structural estimation of the closed-form decisions induced by the model identifies and tests conditions for these strategies to be optimal, and confirm their economic relevance near the end of life.

Hugonnier, Julien, Florian Pelgrin and Pascal St-Amour (2018), “Self-Inflicted Unemployment Scarring, and Stigma”, Faculty of Business and Economics (HEC), University of Lausanne, (paper).

  • Abstract:

    Long-term scars of unemployment include higher ex-post displacement and income losses, as well as lower re-employment that increase in occurrence and du- ration of previous unemployment spells. Human capital explanations assume that capital accumulation is valued by the market, but is impaired by non-employment. We retain the former, yet relax the latter by considering continuous investment decisions made by workers across employment statuses, with positive effects on wages and the likelihood and duration of unemployment spells. We calculate analytically the joint optimal investment by the employed and the unemployed. We identify two dynamically stable steady-state values with a lower one for the unemployed generating circular dynamics whereby human capital optimally falls during unemployment spells and increases again upon re-employment. It follows that scarring and stigma are endogenously generated as a by-product of decisions made by agents and are therefore self-inflicted. We perform a counter-factual exercise allowing to gauge and confirm the importance of employment risks hedging in total demand for human capital and that of moral hazard issues in the design of UIB programs. We also show that status-dependent accumulation technology and capital specificity complement, but are not required for scarring and stigma.


Mesquida, Yannis, and Pascal St-Amour (2017), “Joint Lifetime Financial, Work, and Health Decisions: Thrifty and Healthy Enough for the Long Run?”, manuscript, Faculty of Business and Economics (HEC), University of Lausanne, (paper).

  • Abstract: US individuals are separately admonished for not being healthy enough, and for insufficient savings in both financial and pension assets. However, characterizing joint health, and assets sufficiency becomes more challenging when exposure to death, and sickness risks can be altered through forward-looking health spending and leisure decisions made by agents. We consider such a framework to reassess joint adequacy in health capital, financial and pension wealth. Our benchmark is flexible enough to admit either healthy-and-thrifty, or live-fast-die-young optimal strategies. Nevertheless, observed choices are found to be inconsistent with rational planning. Individuals in the data are not healthy enough, and consequently face a shorter life horizon than expected. Moreover, full insurance, and age-increasing wages would optimally point to more medical expenditures and less leisure to maintain health than currently observed. As a consequence, observed post-retirement income is too low, and financial wealth is depleted too rapidly, leading to a sharp drop in consumption after 65 that is inconsistent with optimizing behavior. Relaxing assumptions on complete health insurance and pension regimes only partially alleviates these discrepancies.