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The Life Satisfaction Approach to Environmental Valuation

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  • Bruno S. Frey
  • Simon Luechinger
  • Alois Stutzer

    ()
    (Institute for Empirical Research in Economics, University of Zurich, 8006 Zurich, Switzerland
    KOF Swiss Economic Institute, Swiss Federal Institute of Technology, 8092 Zurich, Switzerland
    Department of Business and Economics, University of Basel, 4002 Basel, Switzerland)

Abstract

In many countries, environmental policies and regulations are implemented to improve environmental quality and thus individuals' well-being. However, how do individuals value the environment? In this paper, we review the life satisfaction approach (LSA), which represents a new nonmarket valuation technique. The LSA builds on the recent development of subjective well-being research in economics and takes measures of reported life satisfaction as an empirical approximation to individual welfare. Microeconometric life satisfaction functions are estimated, taking into account environmental conditions along with income and other covariates. The estimated coefficients for the environmental good and income can then be used to calculate the implicit willingness to pay for the environmental good.

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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Resource Economics.

Volume (Year): 2 (2010)
Issue (Month): 1 (October)
Pages: 139-160

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Handle: RePEc:anr:reseco:v:2:y:2010:p:139-160

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Related research

Keywords: subjective well-being; nonmarket valuation; cost-benefit analysis; air pollution;

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References

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  1. Richard Carson & Nicholas Flores & Norman Meade, 2001. "Contingent Valuation: Controversies and Evidence," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 19(2), pages 173-210, June.
  2. Bruno Frey & Simon Luechinger & Alois Stutzer, 2009. "The life satisfaction approach to valuing public goods: The case of terrorism," Public Choice, Springer, vol. 138(3), pages 317-345, March.
  3. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
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  10. Rehdanz, Katrin & Maddison, David, 2005. "Climate and happiness," Ecological Economics, Elsevier, vol. 52(1), pages 111-125, January.
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  11. MacKerron, George & Mourato, Susana, 2009. "Life satisfaction and air quality in London," Ecological Economics, Elsevier, vol. 68(5), pages 1441-1453, March.
  12. Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
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  14. Paul Dolan & Robert Metcalfe, 2008. "Comparing Willingness-to-Pay and Subjective Well-Being in the Context of Non-Market Goods," CEP Discussion Papers dp0890, Centre for Economic Performance, LSE.
  15. Di Tella, Rafael & MacCulloch, Robert, 2008. "Gross national happiness as an answer to the Easterlin Paradox?," Journal of Development Economics, Elsevier, vol. 86(1), pages 22-42, April.
  16. Smith, V. Kerry & Osborne, Laura L., 1996. "Do Contingent Valuation Estimates Pass a "Scope" Test? A Meta-analysis," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 287-301, November.
  17. Richard Carson & Robert Mitchell & Michael Hanemann & Raymond Kopp & Stanley Presser & Paul Ruud, 2003. "Contingent Valuation and Lost Passive Use: Damages from the Exxon Valdez Oil Spill," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(3), pages 257-286, July.
  18. Luechinger, Simon & Raschky, Paul A., 2009. "Valuing flood disasters using the life satisfaction approach," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 620-633, April.
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Citations

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Cited by:
  1. Alexander M. Danzer & Natalia Danzer, 2014. "The Long-Run Consequences of Chernobyl: Evidence on Subjective Well-Being, Mental Health and Welfare," CESifo Working Paper Series 4855, CESifo Group Munich.
  2. Ambrey, Christopher L. & Fleming, Christopher M., 2011. "Valuing Ecosystem Diversity in South East Queensland: A Life Satisfaction Approach," 2011 Conference, August 25-26, 2011, Nelson, New Zealand 115347, New Zealand Agricultural and Resource Economics Society.
  3. Christine Bertram & Katrin Rehdanz, 2014. "The role of urban green space for human well-being," Kiel Working Papers 1911, Kiel Institute for the World Economy.
  4. Beja Jr, Edsel, 2012. "Two explanations to the willingness to accept and willingness to pay gap plus an alternative," MPRA Paper 36239, University Library of Munich, Germany.
  5. Beja Jr., Edsel L., 2011. "Subjective Well-Being Approach to Environmental Valuation: Evidence for Greenhouse Gas Emissions," MPRA Paper 27862, University Library of Munich, Germany.
  6. Clough, Peter & Hickman, Matt & Stephenson, John, 2013. "Valuing natural assets," NZIER Working Paper 2013/3, New Zealand Institute of Economic Research.
  7. Stutzer, Alois & Frey, Bruno S., 2010. "Recent Advances in the Economics of Individual Subjective Well-Being," IZA Discussion Papers 4850, Institute for the Study of Labor (IZA).
  8. Beja Jr, Edsel, 2012. "Who is happier: Housewife or working wife?," MPRA Paper 40533, University Library of Munich, Germany.
  9. Edsel Beja & David Yap, 2013. "Counting Happiness from the Individual Level to the Group Level," Social Indicators Research, Springer, vol. 114(2), pages 621-637, November.
  10. Edsel Beja Jr., 2013. "Subjective Well-Being Approach to the Valuation of International Development: Evidence for the Millennium Development Goals," Social Indicators Research, Springer, vol. 111(1), pages 141-159, March.
  11. Ambrey, Christopher L. & Fleming, Christopher M. & Chan, Andrew Yiu-Chung, 2014. "Estimating the cost of air pollution in South East Queensland: An application of the life satisfaction non-market valuation approach," Ecological Economics, Elsevier, vol. 97(C), pages 172-181.
  12. Bruno S. Frey & Alois Stutzer, 2010. "Happiness: A New Approach in Economics," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(4), pages 3-7, 01.
  13. Oswald, Andrew J., 2012. "The Value to the Environmental Movement of the New Literature on the Economics of Happiness," The Warwick Economics Research Paper Series (TWERPS) 997, University of Warwick, Department of Economics.
  14. Alois Stutzer & Bruno S. Frey, 2010. "Happiness and Political Institutions," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(4), pages 32-36, 01.
  15. Maike Schmitt, 2013. "Subjective Well-Being and Air Quality in Germany," SOEPpapers on Multidisciplinary Panel Data Research 541, DIW Berlin, The German Socio-Economic Panel (SOEP).
  16. Heinz Welsch & Susana Ferreira, 2014. "Environment, Well-Being, and Experienced Preference," Working Papers V-367-14, University of Oldenburg, Department of Economics, revised May 2014.
  17. Ambrey, Christopher L. & Chan, Andrew Yiu-Chung & Fleming, Christopher M., 2013. "Estimating the cost of air pollution in South East Queensland: An application of the life satisfaction non-market valuation approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152133, Australian Agricultural and Resource Economics Society.
  18. Christopher Ambrey & Christopher Fleming, 2014. "Valuing Ecosystem Diversity in South East Queensland: A Life Satisfaction Approach," Social Indicators Research, Springer, vol. 115(1), pages 45-65, January.

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