Accident costing using value transfers: New unit costs for personal injuries in Finland

The study deals with valuation of economic losses resulting from personal injuries of road traffic accidents. In particular, valuation of human welfare losses is examined. The study presents an analysis of valuation methodogies currently used in Finland and some other countries for estimating the unit values of personal injuries. The theoretically correct method for valuing human welfare losses according to economics is presented and recommendations for a new practice for Finland are made accordingly. The individual willingness-to-pay method is proposed to be adopted for valuing the changes in accident risk subjectively. This method will produce theoretically consistent risk values for representing human losses of traffic accidents. The theoretical foundation of the methodology also highlights how economics considers the welfare impacts of living in risky environments. A change in valuation methodology immediately calls for revising the currently used unit values in Finnish highway economics. Therefore, the study examines the whole range of existing value estimates and their components. However, no empirical cost inventories or valuation surveys are carried out. The new unit costs for personal injuries are based on both an earlier cost inventory and values transferred from Sweden. The applicability of such value transfers is discussed theoretically. Finally, the study presents a proposal on unit costs for personal injuries recommended to be applied in project appraisals and socio-economic costing of transport in Finland.