We analyze data of a Spanish nationally-representative survey where subjects reported their willingness
to pay (WTP) for road safety improvements, specifically they hypothetically paid for a reduction of the
risk of a road fatality and several injuries. Respondents also reported their current income (CI) and
permanent income (PI). The latter refers to their normal income once they considered various stages of
low/high earnings throughout their entire lives. Consequently, we define relative income as the
comparison of CI with respect to PI. Three income frames are generated as explanatory variables: gain
(with CI > PI); neutral (with CI = PI); and loss scenario (with CI < PI). Surprisingly, we
find that conditional
on current income, and on a set of characteristics, those respondents in gain frame reported higher WTP
than those in neutral and loss scenario. Further analysis shows that the income frames effect is higher and
more significant for the older half-sample (>45), being about three or four times higher than for the
younger subset. Possible interpretations of the role of PI as a reference point are considered given the
results. A reference-dependent utility function of income, where PI is the reference point, is proposed to
describe the monetary valuation of safety within the theoretical framework previously developed in the
safety economics literature.
